UPDATED 8/3/2020 – Don’t rush into applying for forgiveness

Did you receive received financial support through the Paycheck Protection Program (PPP)? If so, you might be eager to take the next steps toward applying for loan forgiveness. While understandable, it might not be wise.

It may actually pay off to wait to pursue the loan forgiveness process until more guidance and potentially more assistance is available from the federal government. The rules and guidelines governing loan forgiveness continue to evolve as legislators wrestle with the best way to help our country rebound from the devastating financial impact of our country’s response to the Covid-19 pandemic.

Stay tuned. We will continue to post updates as more guidance becomes available.

UPDATED–PPP Extension Bill Gives Businesses Another Five Weeks

On July 4, 2020, Trump signed the PPP Extension Bill. This bill extends the Payroll Protection Program another five weeks, until August 8. This buys Congress a little more time to work out the next round of aid for struggling small businesses.

UPDATE–On June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act, adding some highly anticipated changes to the PPP Act.

Some of the important highlights include:

  • Extend the “covered period” under which small businesses can spend the loan proceeds from eight weeks to 24 weeks, or until Dec. 31.
  • Remove the limits on loan forgiveness for small businesses that were unable to rehire employees, hire new employees or return to the same level of business activity as before the virus.
  • Expand the 25% cap to use PPP funds on non-payroll expenses, such as rent, mortgage interest and utilities, to 40% of the total loan. That lowers the 75% requirement for payroll expenses to 60% to get maximum forgiveness.
  • Allow small businesses to take a PPP loan and also qualify for a separate, recently enacted tax credit to defer payroll taxes, currently prohibited to prevent “double dipping.”
  • Extend the loan terms for any unforgiven portions that need to be repaid from two years to five years, at 1% interest.
  • Give small businesses more time to rehire employees or to obtain forgiveness for the loan if social-distancing guidelines and health-related actions from the Centers for Disease Control and Prevention or other agencies prevented the business from operating at the same capacity as it had before March 1.
  • Extend the period for when a business can apply for loan forgiveness, from within six months to within 10 months of the last day of the covered period, before it must start making interest and principal payments. Under the new bill, PPP loan interest and payment of principal and fees will be deferred until the loan is forgiven by the lender.

Stay tuned. We will continue to monitor and evaluate the impact of these changes, and we expect that the SBA will issue an update to their FAQ’s in the next few days. As more guidance is available, we will post updates here.


The SBA recently released guidance on completing the application for forgiveness of PPP loans. As with the entire program, there seem to be a LOT of questions that remain unanswered. We will continue to monitor the developments and keep our clients informed on the progress.

The information we currently have with regard to PPP forgiveness is not entirely complete. The SBA should be releasing additional, more detailed guidance in the near future. In the meantime, we have the original legislation, as well as some additional guidance (like the Fact Sheet from US Treasury and the FAQ’s from the SBA) that we can refer to. In addition, each lender has some leeway in exactly what documents they will require and how the forgiveness policy is applied. In other words, read all you can, but be sure to ask your lender for their specific guidelines.

The overarching objective of the legislation of the PPP program was to ensure that businesses continued to pay employees as they did previously. That means keeping the same number of employees (or more) at the same rate of pay (or more). So we recommend trying to do exactly that.

You still have some flexibility, such as when or how much owners get paid, or whether or not to hire new staff. If business needs dictate, or if you simply prefer to wait before pulling the trigger on these business decisions, that is okay. But don’t wait too long!  You have 8 weeks from the day you receive the funds to use them for the purposes described.

If you would like help with your strategic planning or with the actual calculations, our professionals at  KuberneoCPA are available for analysis and advisement services to help you through the process.

From the PPP Fact Sheet:

How much of my loan will be forgiven? You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan.

In other words, as we understand it, if you borrowed, say, $100,000 (based on 2.5x of your monthly payroll, or approximately 10 weeks worth of payroll), then your payroll expenses during the 8 weeks after receiving the loan needs to be at least $75,000. Otherwise, the excess amount will not be forgiven and you will need to repay it under the terms of the loan.

You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

How can I request loan forgiveness?

You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must then make a decision on the forgiveness within 60 days.

We expect that the required documentation for the debt forgiveness will include the same type of documentation needed in the original loan application (941, payroll summary reports, etc.), as well as details and support related to the other eligible payments. While it is yet unclear exactly what will be required, we recommend that you’re prepared to submit a lease or mortgage and copies of utility bills, as well as proof of payments (canceled checks, bank statements, online confirmations, etc.).

It’s never too soon to begin thinking about your debt forgiveness application. Take the small steps now of gathering the information you will need to put yourself in the best position to get an approval!