Over the past several weeks, we have been recommending to clients who received a PPP loan to sit tight on filing their PPP forgiveness application. This advice stems from the expectation that the SBA will release their next round of FAQs, which should provide answers to several outstanding questions, as well as example calculations for various scenarios. It is our understanding that the SBA has these FAQs ready to release, but Congressional action may delay such a release for a number of weeks.
The HEROES Act, passed by the House of Representatives on May 15, 2020, has yet to see the Senate floor. Rather, during this past week, the Senate GOP has been attempting to pull together a “CARES 2.0” bill before their impending recess in an attempt to provide additional relief to both people and businesses.
When will this be passed?
The Senate GOP’s goal is to have a bill presented on the Senate floor for a vote prior to their August 8th recess. While much of what we know now is contained within summaries of discussions, we are aware of discord amongst the GOP rank-and-file as to whether their package goes far enough, or whether it goes too far. Additionally, the House Democrats have reiterated the HEROES Act will be their basis of any negotiations. Therefore, it would appear this stimulus phase appears to be more wrought with politics than its predecessors, which could drag this process out for some time. With the additional unemployment benefits expiring July 31st, many believe a smaller and more immediate package to address this expiring benefit will be passed prior to the August 8th, which would push any legislation addressing the PPP into the Fall of 2020.
What does this means for PPP borrowers?
While nothing has been formulated into a package or bill to present on the Senate floor, the GOP are considering a number of options to further streamline the PPP forgiveness process. Discussions have centered around an “automatic forgiveness” for any PPP loan of $150,000 or less, and an “intermediate forgiveness” of any PPP loan of $1 million or less. Again, these have all been discussions, and any notion that this is the new rule that you may be hearing in the media is premature.
Given the high attention the PPP program has faced in regards to who obtained a PPP loan and the issues it has created, the SBA and Department of the Treasury are continuing to focus on eliminating fraud within the program. As such, throughout the duration of the negation process, we expect these dollar thresholds for “automatic forgiveness” or “intermediate forgiveness” to either remain the same or drop to account for this fraud risk.
Will there be more assistance to businesses?
As part of the GOP’s CARES 2.0 package, there have been discussions of allowing businesses to apply for a second round of PPP funding. Talks of an additional $90 billion being added to any amount remaining from the initial appropriations on the new PPP application deadline of August 8, 2020, would be available to a smaller pool of businesses. These initial discussions have mentioned eligible businesses would be capped at 300 employees and/or those that have seen a decrease in revenue of 50% or more. Others have indicated they would like only businesses within “highly impacted communities” to be eligible to apply. Similar to the PPP forgiveness, we do not have details as to what much of this means and any details we do know will likely be negotiated during the process.
What do I do now?
As we mentioned at the beginning, we are recommending PPP borrowers to remain patient and sit tight. While your lender may have informed you that they are ready to begin processing PPP forgiveness applications, there is currently no means for the lender to transmit that information to the SBA. With the SBA approving nearly 5 million PPP loan applications in a short timeframe, many want to get a head start, including the lenders. As a reminder, PPP borrowers have up to 10 months from the end of their 8-week or 24-week covered period to file their forgiveness application.
We understand and empathize with the uncertainty many of you are facing within your businesses. While we understand much of this is based off discussions amongst a single party within a single portion of Congress, we felt it was important to provide you the information we are currently hearing. As governmental policies, enforcements, and mandates at the local, state, and even federal level will shape your respective business environment for the coming months, we want to keep you abreast that action is at the very least being discussed.
Please reach out to us with any questions.