Client Alert – PPP – Automatic Forgiveness – AlmostJul 16, 2020
- FisherBroyles News
In the ever changing landscape that is the Paycheck Protection Program (“PPP” or the “Program”) created under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which has provided upwards of $670 billion in loans for qualifying small businesses to help cover their costs associated with payroll, benefits, interest, rent and utilities during the COVID-19 Pandemic, a bipartisan bill that would expedite the forgiveness process for most borrowers who received loans has been introduced by Sens. Kevin Cramer (R-N.D.), Bob Menendez (D-N.J.), Thom Tillis (R-N.C.) and Kyrsten Sinema (D-Ariz.). The proposed Paycheck Protection Program Small Business Forgiveness Act (the “Forgiveness Act”) would allow PPP loans of $150,000 or less to be automatically forgiven once the borrower completes a one-page forgiveness document.
With the growing support of about 150 trade associations, including the American Bankers Association and many CPA firms, the Forgiveness Act is gaining broad support in Congress because, as the sponsors stated, “(t)his bipartisan legislation would ensure our nation’s small business owners can focus their time, energy, and resources back into their business and communities instead of allocating significant time and resources into completing complex forgiveness forms.” Further, “(s)mall businesses and their employees are the backbone of our nation’s economy and communities. Their time and resources would be better focused on getting the economy safely back up and running, not processing burdensome paperwork.”
To further the case for the Forgiveness Act, the data shows that the approximately 3.7 million PPP loans of $150,000 or less account for not less than 85% of all PPP approved loans; however, they represent only 26% of the PPP funds disbursed. There are various estimated costs associated with applying for forgiveness for a PPP loan, but typically a loan of $150,000 or less probably will cost the borrower approximately $2,000 to process (whether internally or with outside legal or accounting counsel, or both), and approximately $500 or more for the lenders. The sponsors of the Forgiveness Act claim that the new legislation could save small businesses $7.4 billion and banks nearly $2 billion in forgiveness application processing costs. It should also be noted that PPP loan data released by the SBA last week found that the Program has supported more than 51.1 million jobs as of June 30th – so streamlining the forgiveness process even further than we reported last month in our Client Alert will only increase the effectiveness of the Program’s original goals, which was to keep employees on payroll and off unemployment.
Highlights of the Forgiveness Act include:
- Automatic forgiveness for covered PPP loans of less than $150,000, if the borrower submits a simple, one-page attestation form to their lender;
- The PPP lenders will be held harmless from any enforcement action if the borrower’s attestation contained any falsehoods;
- The borrower attestation will include a means by which a borrower, on a voluntary basis, will provide the following demographic information: sex; race; ethnicity; and veteran status of owner; and
- Borrower’s may only be subject to an enforcement action or penalty relating to loan origination, forgiveness, or guarantee of the covered loan if the borrower commits fraud or expended the loan proceeds on expenses that are not allowable under the Program.
The Forgiveness Act has not yet been passed by Congress and there is no guarantee that it will be – not to mention that Congress is in recess until July 20th; however, at FisherBroyles, we are closely monitoring this very fluid situation. Please continue to check for subsequent alerts on our FB News Site, as well as the information being disseminated on both the SBA’s informational site and the Treasury’s PPP Page. We also strongly encourage borrowers to continually check with PPP lenders to see when they intend to start accepting Forgiveness Applications and what processes they are likely to put in place to do so.
Please contact any of the following for information or with any questions or more specific situations:
Paul Economon, Partner email@example.com
Kevin Gluntz, Partner, firstname.lastname@example.org
Gordon M. Berger, Partner email@example.com
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