What To Know About Applying For The PPP And Loan Forgiveness

Time is running out on the Paycheck Protection Program (PPP). June 30 is the deadline for small businesses to apply for forgivable PPP loans. Even for businesses now reopening, the PPP is still available as a source of Covid-19 financial relief.

Initially plagued by confusing vagueness and overly restrictive rules, the PPP has been improved since the program’s launch. The US Small Business Administration (SBA) made many guidance updates, and earlier this month Congress amended the law.

However, little time remains to apply as companies busily focus on meeting strict reopening requirements under the coronavirus guidance of state authorities. Additionally, with high-profile negative publicity for a few companies that received forgivable PPP loans, plus government investigations and criminal charges for abuses of the PPP, some small-business owners have been wary about applying for this potentially valuable crisis aid.

To find out what busy small-business owners and nonprofit executive directors need to consider now, before applying ahead of the June 30 deadline, I turned to Greg Reibman for a quick take on PPP loans. As the president of the Newton-Needham Regional Chamber in Massachusetts, he routinely answers questions about the PPP from member businesses.

1. What’s the attitude of local small companies to the PPP, and how has it been changing?

The PPP rollout was very frustrating. The rules were vague. We’re now up to the SBA’s 18th “interim final rules,” an indication of how often the feds have had to update their guidance. Finding a bank early on was very challenging. In the end our local community banks stepped up and helped customers of the larger banks who were having trouble getting through. 

Our chamber has more than 900 member companies, mostly in Greater Boston’s western suburbs. Most were qualified for the PPP. In the end, I’ve heard from only a half dozen or so who couldn’t get the loan, and typically that was for extenuating circumstances.

2. Can I still apply for a PPP loan?

The deadline to apply is June 30 but I understand that some banks have already closed their application portals, so anyone who wants to apply should do so ASAP. Don’t wait until the final days.

The SBA announced on June 19 that it has revived its Lender Match online tool to help underserved and disadvantaged small businesses and nonprofits. In its news release, the SBA described the tool as a resource for “pandemic-affected small businesses who have not applied for or received an approved PPP loan to connect with lenders.”

3. Is there money left for the program? If so, is there a list of banks or websites that still want applications?

According to the most recent SBA data, as of June 20 over 4,666,560 loans have been made. The good news is that as of that day, the PPP still had almost $130 billion in unallocated funds.

Any unused funds will be sent back to the US Treasury unless Congress approves another use. Last week, Democratic Senators Chris Coons of Delaware and Jeanne Shaheen of New Hampshire proposed extending the PPP deadline to Dec. 30 or longer. But no one who is thinking about applying should count on Congress to shift the application deadline. Apply now.

4. If you don’t want to pay a lawyer or accountant to do the initial application, given the rush to the June 30 deadline, how hard is it to understand? Is there any way to get free guidance on what to do?

From what I’ve heard, most small businesses have been able to apply just with the help of a local banker, but really it’s going to depend on your circumstances, how much time you have, and your ability to dig out some financial history. The trickier part may be after you get the loan. You want to make sure you follow the rules so you can exercise the forgiveness features. This would mean you wouldn’t have to pay any or most of it back.

Check with your local SBA office for a list of partners who offer free advice. Or search online for one of the many webinars or how-to articles presented by law firms, accounting firms, and others. Just be sure and select a credible source.

5. If a small business is now reopening, can it still meet the qualifications for a PPP loan?

Yes. Your business does not need to be closed to apply.

6. Are these SBA loans really forgivable and tax-free? If you qualify for loan forgiveness, you don’t need to pay it back?

Yes, as long as you carefully follow the guidelines and spending restrictions.

7. The rules seem to have loosened since the PPP was announced. What’s different now in how and when a business can spend the money to still make the loan forgivable?

This is actually refreshing news. Earlier this month, the House and Senate both overwhelmingly agreed to revise the program with the Paycheck Protection Program Flexibility Act. This law lowered the portion of the PPP loan that must be spent on payroll to 60% from 75%. The rest must be spent on rent, utilities, and other business-related expenses.

They also did the following:

• Extend from 8 to 24 weeks the amount of time you can use the funds while remaining eligible for loan forgiveness
• Extend from 2 to 5 years the time new PPP loans must be paid back if the amount provided doesn’t convert into a grant (i.e. the forgivable part of the loan)
• Loan forgiveness remains possible if former employees won’t come back to work, or if revenue in December 2020 is below February 2020 levels.
• Payroll tax deferment is now allowed too

8. Can companies use the PPP loan funding only for payroll?

No. Now up to 40% can be spent on non-payroll expenses.

9. Is the SBA, Treasury Department, or IRS going to publish a list of all companies, nonprofits, and educational institutions that have received the PPP loans amid the Covid-19 crisis? If so, should a company be concerned about negative publicity?

SBA and Treasury announced June 19 that they would release the names of businesses that received any taxpayer-funded PPP loans of more than $150,000. Borrowers who obtained loans of less than $150,000 (more than 75% of all the loans) will not have their identities disclosed.

[For more about protecting your business from negative publicity about taking a PPP loan for coronavirus financial relief, see my Forbes.com articles Paycheck Protection Loan Backlash: How To Defend Your Business Reputation And Avoid Getting Shake Shacked and Federal Charges Of PPP Loan Fraud Are Here To Remind You These Loans Are Not “Free Money”.]

10. I’ve heard that after you get the loan funds, the application for loan forgiveness is much longer and more challenging. Is there any short form of it?

There are two new applications that you can choose from to complete. One is a “borrower-friendly” application and a separate form, dubbed by the SBA as the “EZ version” for borrowers who meet any of the following requirements:

• Are self-employed and have no employees; OR
• Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
• Experienced reductions in business activity as a result of health directives related to Covid-19, and did not reduce the salaries or wages of their employees by more than 25%

11. Do I need to rehire all of my employees to make the loan forgivable? Can I still fire, or give bonuses to, those that work for me?

You do not need to rehire all the employees you laid off, or restrict your firing or rewarding of employees, which is confirmed in recent SBA guidance.

12. Can a nonprofit or charity apply for the PPP? Would it be a forgivable loan? Are the rules different?

Yes, 501(c)(3) nonprofits are eligible, following the same rules.  

13. How does the Economic Injury Disaster Loan (EIDL) Emergency Advance differ from the PPP?

PPP loan recipients are also eligible to participate in the recently reopened EIDL program, as long as the two loans are for different purposes (so you don’t use the EIDL for payroll). While you must apply for a PPP loan through an SBA-approved lender, you must apply for EIDL directly through the SBA. You will hear directly from the SBA via email.

Landlords and nonprofits are eligible for EIDL. This is big, since landlords couldn’t apply for PPP.