The SBA released a one-page forgiveness application for Paycheck Protection Program (PPP) borrowers with loans of $50,000 or less. The new application removes calculations required on the forgiveness application generated in June 2020 and seeks to streamline the documentation requirements. The question for many borrowers will be how the PPP lenders implement this new application.
This new application requires borrowers to confirm that the PPP-loan proceeds were used for eligible costs, and to provide supporting documentation showing such payment. The SBA can still audit the application, but this process should relieve many national PPP lenders of the obligation to verify all of their loans. The lenders have been waiting for the SBA and Congress to issue this guidance, however, many lenders believe the amount is arbitrary and does not go far enough to help small businesses. Those borrowers with loans over $50,000 will have to provide, at a minimum, all the documentation required by the SBA’s June 2020 applications. The scope of the document production will vary from lender to lender.
Many companies have already gathered extensive documentation to support their use of the PPP funds. The SBA believes its new guidance will relieve some of that effort for loans of $50,000 or less, but the document production is not as simple as the SBA would like you to believe. For example, if a small business used their entire PPP proceeds to pay payroll to themselves or their employees, they can submit bank statements or cancelled checks showing those payments from the business to the employee to document the qualifying payments. This is not always an easy task if the borrower used multiple bank accounts for these funds. Borrowers can submit a payroll ledger that many of the payroll services have generated if that is available to them.
Congress has been debating automatic forgiveness for PPP loans under $150,000 for several months. The larger lenders have been waiting for Congress to act, but time is quickly running out and lenders cannot wait any longer for Congress to pass this legislation. Accordingly, you will start to see the national lenders who have not opened their portals start contacting borrowers and opening their portals before the end of October.
The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or feel free to contact a member of the Commercial Finance Practice Group.
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