Thousands of businesses who received PPP loans have to file for loan forgiveness by June 30th. However, many do not know that lenders, not the Small Business Association (SBA) are the primary decision-makers on forgiving PPP loans or not.
About PPP Loans
The Treasury Department and SBA released new PPP guidance regarding the Paycheck Protection Program. The new guidelines address loan forgiveness and procedures that borrowers and lenders must use during the review process. Those who received the earliest PPP loans will need to apply for loan forgiveness soon.
Loan Forgiveness Guidance
The new guidelines will confirm forgiveness eligibility and portions of forgivable loans. If a lender denies loan forgiveness, the business owner must repay the remaining balance on or before two years since the end of the loan. PPP loans only cover certain costs.
Payroll Costs
- Payroll costs must make up 75% of the amount for which a borrower seeks loan forgiveness
- The loan could begin on the first day of the payroll cycle
- Confirms that payroll costs start on the day the employee’s pay is earned
- Employee bonuses and hazard pay are eligible for payroll costs under $100,000 annually
- Furloughed wages are recoverable
- Owner-employees and self-employed individuals have limited payroll compensation of no greater than the lesser of 8/52 of 2019 compensation or $15,385 per individual,
Nonpayroll Costs
- 25% of eligible nonpayroll costs (excluding advanced interest on mortgages)
Forgiveness Reductions
- EIDL advances deducted from loan forgiveness amounts
- Unpenalized voluntary resignations and schedule reductions or for-cause terminations
- Also, no penalization for rehiring an employee
Lender Rules
Under the new guidelines, lenders have 60 days from receipt of a complete forgiveness application to issue a decision to the SBA. The lender needs to request payment from the SBA at the time it issues a decision to the organization. Then, the SBA has 90 days to remit appropriate forgiveness to the lender plus accrued interest.
Even though lenders review loans for SBA, the agency issued guidelines for the process. This includes the SBA reviewing any PPP loans at any time in its discretion and loans smaller than $2M. Borrowers can appeal decisions to the SBA.
Steps After Loan Forgiveness Denial
If after submitting all the correct paperwork, a lender denies your PPP loan forgiveness. You can appeal to the SBA for more information as to why the lender denied your loan. Also, our attorneys will help you navigate the difficult roads of loan forgiveness. Our consultations are free.
Therefore, if you or someone you love was negatively impacted by COVID-19, compensation may be available. Our attorneys are experienced with complex litigations. These claims could be complicated and problematic if you do not have the right team in place who are dedicated to fighting for your justice. Our consultations are free. Contact us today.