5 tips for navigating SBA Paycheck Protection Program loan forgiveness
By John Asbury
Atlantic Union Bank CEO
The Small Business Administration (SBA) recently opened its forgiveness portal for small business owners who participated in the SBA Paycheck Protection Program (PPP). Many lenders are beginning to process forgiveness applications, including Atlantic Union Bank. While the SBA did release an EZ PPP Loan Forgiveness Application requiring less documentation and calculations, there are still many questions surrounding the process, and Congress and the SBA continue to release new information.
We know first-hand from our customers there are many questions surrounding the forgiveness application process. Here are our top five tips for borrowers when navigating the loan forgiveness process to make it easier and less stressful.
According to SBA guidelines, borrowers have up to 10 months following the end of their chosen coverage period to submit their PPP Loan Forgiveness Application. Loan payments are deferred until after the borrower has submitted for forgiveness and the SBA has made a decision. Also, keep in mind that Congress is still discussing automatic forgiveness for loans under $150,000. They have also introduced a new middle-tier proposal for loans between $150,000 and $2 million.
“At Atlantic Union Bank, we are currently processing loan forgiveness applications for customers who have borrowed $150,000 or more. We are hopeful Congress will ‘automatically’ forgive all loans under $150,000 through a much simpler confirmation process” says Alison Holt-Fuller, head of product management and business first line risk at Atlantic Union Bank. “While you have to do what is best for your situation, sometimes the longer you wait, the more the process may improve.”
Make sure all of your documents have dates.
It is important all documents submitted as proof of payroll and other expenses have dates on them to ensure the expenses were incurred during your chosen covered period. Most payroll companies will ensure documents have the date on them, but you cannot go wrong with double-checking. If you do not outsource payroll, you can include bank statements showing you paid employees, 941 tax forms and state unemployment insurance files. For nonpayroll expenses such as health insurance, rent, mortgage, utilities and others, save and submit copies of these costs with the dates as evidence that you incurred these expenses during the covered period.
Understand the rules that apply to expenses outside of payroll.
The rule is at least 60 percent of the loan amount must be in payroll expenses and 40 percent can be qualifying non-payroll expenses, including rent, utilities and interest on mortgages. “If your full loan amount is not in payroll expenses or if it is less than 60 percent, you may still be eligible for partial loan forgiveness for some portion of your non-payroll expenses. It is important to review your calculations and supporting documentation carefully,” said Holt-Fuller.
Triple check your submission.
The review process can be lengthy, and in some cases, can take up to several months or more to evaluate your forgiveness request. Your lender and the SBA need to confirm proper paperwork is submitted as well as the application is completed correctly. In order to proactively avoid complications in the review process, examine your application and paperwork. Ensure all attached documentation fell within your covered period, lists the dates and matches the information on your application. If you are missing documentation or the application is not completed correctly, this will likely delay your loan forgiveness.
This includes the standard PPP Loan Forgiveness Application or the EZ Application and anything you used to calculate numbers for your applications. Be sure to make photocopies of the origination of the loan as well as any documentation you sent to get the loan approved at the front end. This part of the process ensures you can justify expenses should you face any obstacles down the line.
I cannot stress enough that it is important to be patient during this time of uncertainty, especially as Congress has not finalized the status of automatic forgiveness for loans under $150,000. We encourage you to contact your lender with any questions or concerns related to the PPP loan forgiveness application. You can also visit www.atlanticunionbank.com/sba-ppp as we have a number of resources to help.
John Asbury, Atlantic Union Bank CEO, is a career banker with more than 30 years in commercial and corporate banking. The company is headquartered in Richmond. Contact your legal and financial advisors for guidance regarding your PPP loan obligations. The statements made herein are not legal or financial advice and are based on our understanding of SBA rules and guidance as of August 27, 2020, which are subject to ongoing updates and revisions by the SBA. Atlantic Union Bank assumes no obligation to update or revise any statements made herein as a result of new information, future events or otherwise.