PPP forgiveness approvals could start soon, SBA says
Entrepreneurs frustrated by the long wait for Paycheck Protection Program (P3) forgiveness guidelines may soon have their questions answered.
Treasury Department plans to start approving and paying PPP pardon requests candidates from this week, the agency said, according to The Wall Street Journal.
The Small Business Administration (SBA) has received more than 96,000 PPP loan cancellation requests since its online portal opened on August 10, but has not approved any, said William Manger, chief of staff at the agency, to House lawmakers last week, the Journal reported.
“We have submitted a number of nominations,” John Buhrmaster, President and CEO of Scotia, 1st National Bank of Scotia, based in New York, told the american banker. “It’s been four to six weeks and we haven’t heard a single word of it.”
Some banks that process the pardon request find it to be time consuming. A Government Accounting Office report released last week found that a lack of clarity regarding forgiveness had resulted in “lender fatigue with the program.”
“It’s actually more complicated than any of us thought,” Jack Murphy, president of business banking at Citizens Financial Group, said Tuesday at a Consumer Bankers Association conference, according to the. Newspaper. “It takes us two weeks to process a request. Four to six contacts between small business owners … and people trying to process pardon requests.”
Congress action is needed
Other banks, including several of the country’s largest, have indicated that they while waiting to see whether new guidelines or legislation will simplify the forgiveness process. They also want to see if Congress will pass legislation providing automatic forgiveness for loans of $ 150,000 or less.
The latest PPP plan, formulated in a stimulus bill introduced by House Democrats, fails to do so, automatically forgiving loans of $ 50,000 or less and offering a simplified forgiveness request for loans between $ 50,000. $ and $ 150,000.
“If this is an opening salvo, it’s a good first step,” James Ballentine, executive vice president of congressional relations at the ABA, told American Banker. “Our goal is for them to do something before they leave town.”
Loan recipients are also waiting for Congress to overturn an IRS decision that has heavy tax consequences for borrowers. In a notice released this spring, the IRS said it had excluded tax deductions for wages and rents paid with repayable PPP loans in order to avoid a “double tax benefit.”
The ruling means that entrepreneurs cannot write off these types of expenses if they were paid with PPP loan funds, many wonder if it will cost more in taxes than paying off the loan.
According to the United States Chamber of Commerce, a canceled PPP loan is tax exempt, but using the loan can also reduce the amount a construction company can write off on its business taxes. Usually, expenses such as payroll, rent, and utilities are deductible from normal taxable income, but without the deduction, a business may owe more in taxes than it normally pays, the House said.
Many entrepreneurs are considering not applying for the PPP exemption in order to avoid a hefty tax bill, according to Joseph Natarelli, head of the national Construction Industry Practice group at accounting firm Marcum LLP.
“They say, ‘If I knew then what I know now, then I wouldn’t have taken the loan and I should have fired people,'” he said.
The key for entrepreneurs, Natarelli said, is to check with their accountants for tax implications before asking for a loan forgiveness.
The construction industry received the third highest number of loans of any US industry, according to SBA data, after the activities of health care and professional, scientific and technical services. Almost 497,000 construction-related companies received a total of $ 65 billion, representing 12% of total program payments. The aggregate loan amount for all industries was $ 101,000.
The top five lenders in the program were:
- JPMorgan Chase
- Bank of America
- Wells fargo
About 84% of borrowers surveyed last month by the National Federation of Independent Business stated that they had used all the PPP funds that were granted to them. About 44% said they would apply for a second PPP loan if there was one.
While lawmakers have sporadically proposed several initiatives to restart the program, some of which would allow some companies to get a second loan – none has taken root. The program closed on August 8, leaving $ 130 billion unallocated.
Parts of this story first appeared in our sister post Bank dive.