Money may be tight, business may not be booming just yet, and for those companies who have taken Paycheck Protection Program loans, it may feel like the thought of applying for loan forgiveness now seem like the best option. But is this the case? Applying for forgiveness may be right for some, but with uncertainty looming, you may want to wait for a few things to shake out before you submit your paperwork.
This according to a recent AICPA blog, many accountants are recommending that clients take a breath and make sure that everything is in order before making the move.
Pending Guidance and Extensions Mean It’s Likely Best to Wait
From potential moves to provide flexibility to the extension of the program until August 8, things are still shaking out in the government. Bills were passed much more quickly than normal, and in turn, guidance is still yet to be passed and the program is yet to have been exhausted.
Understandably, the AICPA recommends holding off on your forgiveness application until everything has shaken out, offering the following reasons you should wait a bit longer and continue to refine your application:
Businesses, Lenders, and Regulators Still Waiting for Guidance
Until the U.S. Small Business Administration (SBA) and the U.S. Treasury Department issue final guidance, lenders can’t finalized these tools. With another potential stimulus package still in the works, it’s unlikely that we are out of the woods on the bills and regulations pertaining to the loans.
The timing on when that guidance will be available is uncertain. Bank of America, as one example, is telling PPP loan holders it expects to begin opening its online loan forgiveness application process in early August and will email instructions to borrowers when it’s ready.
Lenders Still Need Time to Set Up Forgiveness Portals and Processes
As of June 30, 2020, PPP loans have gone to 4.8 million organizations. This means that a small group of approved lenders needs to find out how they are going to process all the applications. As noted by the article, many lenders just aren’t ready for the deluge of forgiveness applications, and are in the process of developing technology tools such as “forgiveness portals” or will leverage other automation options for a more efficient process.
Payroll Partners Still Building Reporting Tools
Along with the banks waiting on regulatory clarity, so are the companies who help you with payroll. For example, many are working on building out reporting tools and compliance tools to ensure that their clients are ready. However, without final guidance, those tools aren’t perfected.
It Might be Safer to Hold Off
Considering the lack of flexibility in the initial bill and the length of time that you have to use the funding, it may be best for you to hold off on your application until you are completely certain that you are compliant. Organizations have 24 weeks to use their PPP money, leaving them more time to take steps that will help them qualify for full loan forgiveness.
That increased flexibility in the time to use PPP funds can be important in maximizing loan forgiveness.
It May Be Cheaper to Hold Off
As noted by the AICPA blog, “borrowers aren’t required to make any loan payments before they apply for forgiveness or until 10 months after their covered loan period ends. Since payments aren’t due yet, there is less urgency to apply for forgiveness.”
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