Loan Forgiveness
The Act clarifies that for PPP loans of $150,000 or less, the borrower will complete a simplified, one-page loan forgiveness application and not be required to submit supporting documentation. This form is still in development and should be available soon. Borrowers eligible for the streamlined application should keep supporting documentation on file in the event of further inquiry from the Small Business Administration (SBA).
Another potential relief component is that borrowers no longer will be required to deduct their Economic Injury Disaster Loan (EIDL) advance from their PPP forgiveness amount. EIDLs of $10,000 were made available for organizations that needed an immediate COVID-19 relief back when the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed. EIDL loans could be rolled into a PPP loan. A new round of EIDL loans was made available in the recent legislation.
PPP Loan Necessity Questionnaire
Organizations that received a PPP loan in 2020 should also note that PPP Loan Necessity Questionnaire was finalized by the SBA at the end of November. This document is separate and distinct from the loan forgiveness applications and applies for organizations, including not-for-profit organizations, with loans of $2 million or more. Questionnaires will be furnished by the PPP loan lender and must be returned to the lender within ten days of receipt. The Loan Necessity Questionnaire will include the following items:
- Revenue comparisons between 2019 and 2020
- The impact on business operations (both governmental and voluntary)
- Mitigation costs incurred by the business
- Liquidity assessment showing the resources available
- Questionnaire allows for borrower explanations and requires documentation for certain answers
Borrowers must perform three certifications and sign the questionnaire. It is highly recommended your legal counsel review your Loan Necessity Questionnaire before you submit the questionnaire to your lender.
Accessing PPP2 Loans
Eligibility for PPP2 loans differs slightly from the original program. Borrowers seeking first-time loans should meet the following requirements:
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
- Sole proprietors, independent contractors, and eligible self-employed individuals
- Not-for-profits, including churches
- Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location
- Broadcast news stations, newspapers, and public broadcasting services; 501(c)(6) not-for-profit organizations; “destination marketing” entities; and housing cooperatives are newly eligible for the PPP as well
Restricted borrowers include:
- Publicly traded companies
- Lobbying organizations
- Companies organized in or with significant operations in China or Hong Kong, and companies with board members who are residents of China
- Companies that receive a grant for shuttered venue operators
- Companies owned 20% or more by the President, Vice President, head of an Executive department, or a Member of Congress, or the spouse of such person To read more click here