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  • Writer's pictureCherie Larson

PPP Loan Forgiveness – Don’t Rush Your Application

If your company applied for a PPP loan, the bank you borrowed through may be sending a link to their portal to apply for loan forgiveness. If you think your loan qualifies for full forgiveness, you may want to wait on applying, even though you as a business owner want to know it is forgiven and put it behind you.

Here’s why waiting may work in your favor:

  • Congress may still help you out. If your loan was under $150,000, there’s still hope that legislation will pass this fall that will make the application a VERY simple process – hopefully just a signature. (If you’d looked at the “EZ” application now, it’s not what most people would call simple!) Also, many banks are just starting to get their portals working.

  • The bank might not really be ready. If you were one of the first to apply for the loan, you can remember how many times the loan process changed or the system had glitches. Waiting a little bit gives your bank time to get their system finalized.

What happens if Congress doesn’t act even though you’ve waited another month or two to apply? Nothing. As long as you apply for forgiveness within 10 months after the end of the 8 or 24-week covered period, you won’t need to begin principal payments until the SBA lets you know it’s not forgiven. If you decide not to apply, the 10-month period still applies – no payments are due until then. (Note that interest does accrue during this period.)

If you think you may not get full forgiveness, it’s fine to apply now. If you’re not sure, start setting aside funds to make that monthly payment. The interest rate is 1%, and the payback period is either two or five years, depending on when you received your funds. Be very careful when you pull together your documentation – double check everything before submitting.

There are reasons why you might want to go ahead and apply right now – just don’t rush into it if you don’t need to. Your tax CPA or business advisor should have some insight for you.

Don’t forget that as of now, any expenses forgiven under the loan cannot be deducted on your 2020 income taxes. (Again, Congress may still act on this.) Also, check with your tax CPA to make sure that forgiveness is the best choice for your business.

Need some help figuring out what to do, navigating the forms, or pulling together paperwork? Reach out to us, we’re here to help.


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