PPP loan cancellation? Don’t rush – Maryland Daily Record
Over the past few weeks, business owners have been eagerly awaiting the opportunity to request their Paycheck Protection Program loan cancellation and close what, for many, has been a difficult chapter in the past. history of their business. Those who have participated in the PPP program must juggle a complex application process and a seemingly ever-changing set of rules.
On August 10, the US Small Business Administration opened its loan cancellation portal following a contested battle between Republicans and Democrats over future legislation for COVID-19 relief.
We think it might be best to keep your horses for now. There are several reasons why business owners may not want to rush to fill out the paperwork:
- Forgiveness simplified: The Law on Health, Economic Aid, Civil Liability Protection and Schools (HEALS Law), the Senate proposal for the follow-up of the CARES law, offers a simplified process for borrowers with loans below $ 2 million and an even more streamlined process for loans under $ 150,000. This could reduce the time, effort, and expense required to complete the application for small business owners.
- More costs can be forgivable: The HEALS law proposes to expand eligible expenses that could be waived to include cloud software, operational expenses for human resources and accounting needs, property damage due to public unrest, vendor expenses and equipment costs personal protection as well as investments to facilitate compliance with CDC guidelines. Note that the requirement that at least 60% of the amount remitted be for salary expenses would still apply.
- The new technology and the problems that come with it: In just a few weeks, the SBA developed a whole new technology portal to make forgiveness easier. Even the best technology solutions from experienced developers have bugs at launch, and borrowers may prefer to give the SBA and lenders more time to identify process improvements.
- There is plenty of time to apply: Borrowers can submit applications up to 10 months after the end of their coverage period, or 24 weeks after receiving the proceeds of their loan
- Interest only applies to amounts that are not remitted: For borrowers who may be averse to debt and interest payments, the SBA stated in its August 4 FAQ on loan forgiveness that payments and interest are only due after a decision regarding the loan forgiveness is taken and there will be no interest charged on the amounts forgiven.
There are a lot of things pending right now that could make the forgiveness process a lot easier and cheaper. If your loan is less than $ 2,000,000, and especially if it’s less than $ 150,000, it’s probably best to keep an eye on what’s going on in Washington and try to enjoy the rest of your summer.
Speak with your financial advisor and learn more about how your business can weather the COVID-19 crisis.
Kyle Harris is senior vice president of UBS Financial Services Inc. in Baltimore.