The SBA PPP loan forgiveness deadline is fast approaching. Don’t stay hooked.

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This article first appeared in business magazines. Web site

Small businesses that took out loans under the US Small Business Administration’s Payroll Protection Program in 2020 must apply for forgiveness soon – otherwise the loans will become permanent and businesses will be liable for payments and interest.

PPP loans are automatically converted to a standard loan at 1% per annum unless the small business applies for forgiveness from the SBA within 10 months of the end of the coverage period during which they had to spend the money. For some businesses, there was an eight-week covered period at the start of the program when it launched in April 2020, with the result that the deadline was mid-July. For most loans that are in the more popular 24-week coverage period, this could mean a September deadline.

In any case, according to experts, small businesses should apply as soon as possible to avoid unnecessary costs in relation to their loans for 2020.

“Once they can apply, they should do so and just continue with the forgiveness process,” SBA Administrator Isabelle Guzman said in a recent interview with Business Journals.

According to the latest SBA data as of May 24, nearly 2 million small businesses have yet to submit their PPP forgiveness loans out of a total of 5.2 million loans disbursed during 2020.

For PPP loans issued before June 5, small businesses will receive a loan term of two years, as opposed to five years for loans approved after June 5, 2020, although small businesses with shorter loans may have the option to extend the maturity of their loans. Justin Elandjian, Responsible Partner for Payroll Protection and Employee Retention Loan Program for Atlanta-based accounting firm Aprio, said in an email.

He also said that some businesses are deliberately delaying filing for forgiveness in order to maximize a separate tax credit that rewards businesses for employee retention, giving small business owners a tax credit for each employee withheld up to a certain amount.

“Accordingly, it is time to take action if the borrower plans to apply for a loan forgiveness, but has not yet done so,” Elandzhyan said. “We are seeing a large number of businesses delay applying for loan forgiveness until the last minute in order to implement their strategies to maximize their ability to demand employee retention loans in addition to forgiving their PPP loans, as Loan Forgiveness Application is even up to 10 months after the end of the coverage period will delay the repayment of the PPP loan. ”

Tenley Karp, a partner and PPP expert at law firm Arnall Golden Gregory LLP, said it’s not hard to imagine that many small businesses aren’t “focused” on deadlines that were originally a year or a half later.

“Small businesses that have received PPP loans must mark the deadline for applying for loan forgiveness on their calendars,” Karp said in an email. “But this step of loan forgiveness is very important because if they miss the deadline, small businesses should immediately start paying their loans to their lenders, including interest. Although 1% is a favorable interest rate, small businesses will still have debts on their books that they can write off. ”

She said that even if a small business needs to hire an accountant or lawyer to help them because they are busier than they were before the pandemic, it would still be worth the effort to get forgiven for loans that could be millions of dollars.

“I think it would be a tragedy for small businesses to refuse to forgive a PPP loan for simply not meeting the deadline for applying for a PPP loan forgiveness,” Karp said.

The final closure of the forgiveness application period occurs even while the SBA is still making changes to the process. The SBA recently told the Associated General Contractors of America that it intends to move away from the controversial PPP loan questionnaire, which critics say has slowed down the forgiveness process and made it much more difficult to obtain forgiveness for larger PPP loans.

The “Loan Requirement Questionnaire,” which was deployed in November, focused on the proof of “good faith” that companies were required to provide when applying for a PPP loan of $ 2 million or more, but it requested substantial documentation of how the companies subsequently entered after receiving the loan, among other things. The AGC ultimately sued the SBA, claiming that the questionnaire was developed in secret and without public participation.

Meanwhile, the SBA is also separately working on how to simplify loan forgiveness for loans between $ 150,000 and $ 2 million, Guzman told Business Journals earlier in June.

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