In holding pattern, small businesses agonize over loan forgiveness

    The Paycheck Protection Program pumped $525 billion in forgivable loans to small businesses from early April through early August. 

    One reason the PPP was so attractive to borrowers was the potential to turn loans into grants. For that to happen, each borrower needs to complete a forgiveness application and submit it to their lender, who can work with them to make it stronger. Then the lender needs to submit the application to the SBA. The agency has up to 90 days to review it and make a decision. The SBA began accepting forgiveness applications Aug.10.

    As Bloomberg reports, because of PPP’s changing rules, there’s confusion around the forgiveness process, says Brian Pifer, vice president of entrepreneurship at advocacy group Small Business Majority, which has about 65,000 members in its network. Multiple trade groups are supporting two bipartisan bills that would forgive PPP loans under $150,000 once the borrower completes a one-page form, according to the American Bankers Association. There’s also broad support to relaunch PPP, though the Brookings Institution is suggesting tax credits would be more effective.

    Chris Levy, a senior vice president at Pursuit, a community development financial institution which has funded over 7,000 PPP loans totaling nearly $500 million to businesses in New York, New Jersey, and Pennsylvania, recommends a few things for business owners struggling with this process: 

    Take a deep breath. Borrowers understandably are eager to complete the forgiveness application and put the PPP loan behind them, Levy says. But you should wait because Congress will likely pass legislation that will make the forgiveness process easier.

    Review the basics. You can get loan forgiveness on what you spend on payroll, rent, and other eligible expenses during the so-called covered period—the 24-week period beginning the day you receive the funds from your PPP loan. However, the rules have changed significantly as PPP has evolved, so go over them again. 

    Consider this scenario. A business owner who received a PPP loan in April could wait until December to apply through their lender for forgiveness. The SBA might not make a determination until February. The borrower would not make any payments during that 10-month period. Read the full story from Bloomberg.