The SBA PPP loan cancellation deadline is fast approaching. Don’t stay on the hook.
This article first appeared in Business Journals’ website.
Small businesses that took out loans from the U.S. Small Business Administration’s Paycheck Protection Program in 2020 must apply for a forgiveness soon, otherwise the loans will become permanent and businesses will be responsible for payments and interest.
PPP loans will automatically convert to a standard 1% interest loan if a small business does not ask the SBA for forgiveness within 10 months of the end of the covered period in which it had to spend the money. . For some companies at the start of the program when it launched in April 2020, there was an eight-week period covered, which would put that deadline in mid-July. For most loans operating under the most popular 24 week coverage period, that could mean a September maturity.
Either way, experts say small businesses should apply quickly to avoid unnecessary costs when it comes to their 2020 loans.
“As soon as they are able to apply, they should do so and move forward with the forgiveness process,” said Isabel Guzman, administrator of the SBA, in a recent interview with The Business Journals.
According to SBA data as of May 24, the latest available, nearly 2 million small businesses had not yet submitted their PPP loans for cancellation, out of a total of 5.2 million loans made in 2020.
For PPP loans made before June 5, small businesses will be granted a loan term of two years, compared to five years for loans approved after June 5, 2020, although small businesses with shorter loans may be in favor. able to extend their loan maturity date by working with their lender, said Justin Elanjian, partner responsible for the paycheck protection program and employee retention credit program at the Atlanta Aprio accounting firm, in an email.
He also said some companies are deliberately delaying their rebate request in order to maximize a separate tax credit that rewards companies that retain employees, giving small business owners a tax benefit for each worker kept up to a certain amount. .
“Accordingly, it is time to take action if the borrower is considering requesting a loan forgiveness and has not yet done so,” Elanjian said. “We are finding that a large number of companies are delaying the submission of their loan cancellation requests until the last minute in order to execute their strategies to maximize their opportunity to claim employee retention credits in addition to canceling their PPP loans by submitting a loan forgiveness request even a day before 10 months after the end of the period covered will allow the PPP loan repayment to remain deferred.
Tenley Carp, partner and PPP expert at law firm Arnall Golden Gregory LLP, said it was not hard to imagine many small businesses not focusing on a deadline initially set at one year or one year. and half.
“Small businesses that have secured PPP loans should mark their calendars with the loan forgiveness application deadline,” Carp said in an email. “But, this loan forgiveness stage is critical because if they miss the deadline, small businesses must immediately start repaying their loans to their lenders, including interest. Although 1% is a favorable interest rate, small businesses will still have debt on their books that they could have written off. “
She said even if a small business had to hire an accountant or lawyer to help it out because it is busier than it was before the pandemic, it would still be worth getting a discount on. loans that could reach millions of dollars.
“I think it would be tragic for a small business to forgo a PPP loan forgiveness just because you forgot the PPP loan forgiveness filing deadline,” said Carp.
The eventual closure of the pardon application period comes even as the SBA is still making changes to the process. The SBA recently told Associated General Contractors of America that it intends to withdraw the use of a controversial PPP loan questionnaire that critics say has slowed the forgiveness process and made it much more difficult to ‘Obtaining the discount for larger PPP loans.
The “Loan Need Questionnaire” that was rolled out in November focused on the “good faith” certification that businesses had to do when applying for a PPP loan of $ 2 million or more. , but he asked for significant documentation on how the companies then did after receiving the loan, among other things. The AGC ultimately sued the SBA, claiming the questionnaire was developed in secret and without public input.
Meanwhile, the SBA is also working separately on a way to streamline loan cancellation for loans ranging from $ 150,000 to $ 2 million, Guzman said in an interview with The Business Journals earlier in June.