Make a PPP pardon request? Here are a few things to know

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U.S. lenders have made more than five million forgivable loans under the federal government’s small business coronavirus initiative, the Paycheck Protection Program. The Small Business Administration started accepting loan cancellation requests in August, and it started approving them this month. Here are a few things to know.

How can I apply?

PPP borrowers should request a discount through the lender that issued the loan. The lender then submits the application to the SBA, which makes the final decision on the amount of rebate a borrower should receive.

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Submission procedures vary depending on the lender. Some lenders have just started accepting applications or have currently opened applications to select borrowers.

For example, JPMorgan Chase, the leading PPP lender by dollar amount, sends emails to clients on a limited basis and invites them to apply based on when they received their PPP funds, according to Jen Roberts, managing director of Chase Business Banking.

“It helped us test the SBA submission process and identify some common pitfalls we can help clients avoid,” Ms. Roberts said.

Other lenders always go to great lengths to get the technology and staff in place before they start accepting applications.

Borrowers can request a discount any time before the loan maturity date. However, to avoid having to start repaying the loan, PPP borrowers should request a forgiveness within 10 months of the end of their covered period. The period covered began on the date of disbursement of the loan and corresponds either to the following 24 weeks or to eight weeks for certain eligible borrowers who opt for this period.

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What does it take to get a loan forgiveness?

For the full amount to be forgiven, borrowers must devote at least 60% of their loan to salary costs and can use the remainder of the funding for other eligible costs, such as mortgage interest, rent, and utilities. The amount of the discount may be reduced if the company reduces the number of its employees or reduces wages and salaries.

FILE – In this September 2, 2020 file photo, a passerby walks past a business storefront with store closure signs in Boston. Unemployment rate in the United States fell to 7.9% in September, but hiring is slowing and many Americans have given up looking for work

Borrowers should prepare to apply by gathering documents and taking stock of the loan amount they spent on qualifying expenses, with a particular focus on payroll, said John Asbury, managing director of Atlantic Union Bank, a Virginia-based lender that issued about $ 1.7 billion. in PPP loans.

“See how much of that you can have forgiven based on your payroll alone, before you start to think about your other qualifying expenses,” Mr Asbury said. “If you can get it all forgiven on the basis of your payroll, you’re done. “

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Lisa Simpson, director of business services at the American Institute of Certified Public Accountants, said some payroll companies offer custom reports to provide the information needed for the rebate request, so borrowers should see if this service is available to them.

Borrowers may also need documentation of other eligible expenses, such as utility bills and rental contracts.

How is the app?

The SBA and the Treasury Department have released three different application forms, and which one borrowers should use depends on the nature of their business, the size of their loan, and downsizing or wages and salaries.

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Both the Full Rebate Request and the EZ Request require the borrower to calculate their rebate amount, attest to how rigorously they followed program guidelines, and submit supporting documentation. . The full form is longer and more complex, but only certain borrowers are eligible to use the EZ form, such as those who are self-employed with no employees or those who have maintained wages and salaries and staffing at certain levels.

The third and final published application, Form 3508S, is for loans of $ 50,000 or less and “streamlines the PPP forgiveness process to provide financial and administrative relief,” the SBA said.

Similar to other applications, Form 3508S requires borrowers to make certifications and submit documents to the lender.

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One key difference: Form 3508S “is less about calculations than certifications,” said Greg Clarkson, SBA division manager at BBVA USA. “Although documentation should always be gathered and provided, it does not need to be reviewed. [by lenders] to the same extent that it was in the EZ form or the full form.

It is important to note that borrowers who use Form 3508S will not experience any reduction in their remittance amount if the company reduces the number of employees or the wages and salaries.

Several lenders and organizations provide resources such as checklists, webinars, and online calculators to help borrowers understand how much discount they might be eligible for and which application forms to use. Some of these tools are free.

How long will it take to get a response?

A lender has 60 days to review the borrower’s application and submit it to the SBA. The agency then has up to 90 days to review the request and make a decision. The agency said it “expects to process the majority of pardon decisions in a timely manner.”

Anything else to know?

Amid controversial negotiations in Washington for more coronavirus aid, many PPP lenders and small business advocates are lobbying the Trump administration and Congress to further streamline the process for forgiving loans under $ 150,000.

Some lenders “are careful not to put people through the process now where it is essentially a full forgiveness process that could be potentially difficult to navigate as new guidelines may be released,” said Ryan Battles, director of technology consulting. group of the accounting firm Ernst & Young, which has helped several lenders set up their forgiveness portals.

In light of legislative uncertainty, Atlantic Union Bank has only opened forgiveness requests to borrowers with loans over $ 150,000 and is advising clients with smaller loans that it may be advisable to suspend the loan. asks, according to Alison Holt-Fuller, the bank’s product manager. management.

Nonetheless, Ms Holt-Fuller said there might be benefits to starting the process as early as possible.

“If you’ve already completed your covered period, then everything is fresh,” Ms. Holt-Fuller said. Borrowers can “lose sight of the accounting perspective of it” in the meantime, she said.

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