In the midst of a worldwide pandemic and resulting economic meltdown, the federal Paycheck Protection Program—known as PPP—offered employers across the country a lifeline: a potentially forgivable loan to cover payroll, mortgage and other costs for a specified time, with an expectation that the loan would be forgiven.
Banks moved into high gear to make the loans accessible, but the shift into forgiveness has been decidedly slower.
"It's not surprising that a program of this size—$520 billion—and complexity would undergo a number of changes and shifts in the early stages," said Cashin White, director of SBA lending for BOK Financial®. "However, it is challenging for companies and lenders alike that the uncertainty that plagued the origination process still lingers."
To help address some of the uncertainty, the Small Business Administration (SBA) has continued issuing Interim Final Rules (IFRs) clarifying or introducing new requirements in the forgiveness process. The most recent IFR was issued on August 24.
Before the summer recess, Congress had hinted at a streamlined forgiveness process, especially for PPP loans for less than $150,000. Now that they've returned, both sides of the aisle are talking about many ways to approach a streamlined forgiveness process—but neither side is signaling an interest in compromise just yet.
Despite the continued uncertainty and inability of Washington to agree on any new stimulus, many lenders and clients are moving forward.
"BOK Financial began accepting forgiveness applications in late August with the goal of providing our PPP borrowers with as much information as possible to ensure a smooth process and full forgiveness," said White, noting that the bank secured more than $2.1 billion in PPP loans for more than 8,100 clients. "Our goals are aligned with our clients' goals of qualifying for as much forgiveness as possible."
White offered four tips to assist PPP borrowers with the process:
1. Select the appropriate covered period.
Borrowers can apply for forgiveness using expenses from either an eight-week or 24-week covered period. The longer covered period may mean that the bulk—or all—of your PPP funds were used for eligible payroll costs, making the application process easier.
2. Use a historical payroll record from a third-party payroll processor like ADP or Paychex to document payroll expenses.
Again, depending on the covered period, amount of loan and payroll costs, it may be the only document you need to verify your forgiveness amount.
3. Consider which application form—3508 or 3508EZ—to use.
If possible, borrowers may want to consider 3508EZ due to its simplicity. The SBA provided a checklist to help borrowers see if they qualify to use the streamlined form.
4. Take your time.
Accuracy is more important than speed at this point. Lenders have 60 days to review the forgiveness applications. Once remitted to the SBA, the SBA has 90 days to review the application and remit PPP payoff to the lender.
Should borrowers wait for more clarification or go ahead and apply? It depends, White said.
"If you are ready and have a full understanding of what is required to apply for forgiveness, there may be no point in waiting," he said. He encouraged all borrowers to carefully review the explicit rules and forms found on the SBA's website.
"There isn't a feeling of a 'gotcha' mentality when applying for forgiveness," said White. "We are all working together to ensure the intentions of the CARES Act and the PPP program come to fruition as millions of business owners have billions in PPP funds fully forgiven while countless American jobs were retained."
. © 2024 BOKF, NA.