PPP Loan Forgiveness Some guidance for completing the application

COURTS & CAPITOLS

PPP Loan Forgiveness Some guidance for completing the application

The past seven months have been a challenge for every dealership. As essential businesses, dealerships were able to continue providing products and services, exempt from mandatory closures. With Paycheck Protection Program (PPP) funds in the bank, and employees and business expenses paid, it is now time to seek forgiveness.

Each and every day, new rules and guidance are issued and must be followed. The Small Business Administration (SBA), U.S. Department of Treasury and PPP lenders are preparing for the next wave of activity for PPP loans. Specifically, the deadline to obtain a PPP loan was Aug. 8, 2020. Other key milestones related to PPP loan forgiveness are rapidly approaching. The SBA previously announced that it intended to make an electronic portal available on Aug. 10, 2020, to begin processing PPP loan forgiveness applications and, on Aug. 4, 2020, the SBA and Treasury released new FAQs regarding loan forgiveness. The new FAQs largely reiterate prior guidance, but include some clarifications that may affect borrowers’ applications for loan forgiveness.

Loan forgiveness applications can be submitted on SBA Form 3508, 3508EZ or a lender-equivalent form. The EZ form provides a streamlined process in that it does not require listing employee-by-employee details. The EZ form may be used if a borrower has not reduced employee headcount or reduced salaries by more than 25%.

It is possible lenders will implement their own forgiveness forms, which is not prohibited. Applications for PPP loan forgiveness and supporting documentation are required to be submitted to the lender that is servicing the applicable PPP loan, not to the SBA directly. Accordingly, PPP borrowers should contact their respective lenders or loan servicers to confirm the process that will be required when applying for forgiveness of their PPP loans. The lenders, not the borrowers, submit forgiveness applications through the SBA portal.

Once a complete loan forgiveness application and supporting documents are provided to the PPP lender or loan servicer, it has 60 days to review and process the forgiveness application. Any disputes are to be resolved between the lender and borrower. Supporting documents include bank statements, payroll service provider reports, tax filings, unemployment insurance tax filings, payment receipts, canceled checks, amortization schedules and lease agreements.

by: Robert C. Goldberg, BTA General Counsel

When the lender has completed its review, it is required to notify the SBA regarding its determination of whether all or a portion of the PPP loan may be forgiven. The SBA has a period of 90 days after its receipt of the lender’s determination of loan forgiveness to remit payment to the lender to give effect to the loan forgiveness. This 90-day period may be extended if the loan is subject to SBA review.

The SBA has announced that all loans in excess of $2 million will be subject to SBA review, meaning that borrowers with loans in excess of $2 million should expect the forgiveness process to take 150 days or longer. Other loans may also be subject to SBA review on a case-by-case basis. Clearly, the SBA will be overwhelmed with applications, making it questionable as to whether all suggested audits will really take place.

It is anticipated that lenders will work with borrowers to maximize forgiveness. The SBA will repay lenders all funds forgiven, making them available for loans at higher interest rates.

The PPP has been a lifeline for dealerships during these challenging times. Be sure to keep abreast of the latest updates and make certain to meet all deadlines. Note that a dealership has 10 months to submit its forgiveness application. BTA will continue to keep you advised of the latest developments. n

Robert C. Goldberg is general counsel for the Business Technology Association.

He can be reached at robert.goldberg@sfnr.com.