The confusion continues for some businesses that took advantage of PPP loans to get through the COVID-19 pandemic this year. The pandemic is lasting longer than anyone believed it would. Now companies that have made it this far may have another hurdle to clear before gaining forgiveness of their PPP loan balance.
The Process is Underway
On August 10, the SBA officially opened its loan forgiveness portal. Many companies that took out PPP loans have been collecting the required documentation for forgiveness and have already submitted the forms needed to get their PPP loans forgiven as promised by the government. A few firms have already received confirmation from their lenders that their loan has been forgiven. These are the lucky ones.
A New Wrinkle
In May, following public backlash over large corporations’ receipt of PPP funding, the SBA made it clear that they would audit PPP loans over $2M for compliance to the rules of the program. However, the SBA is now seeking approval from the Office of Management and Budget (OMB) to send “loan necessity” questionnaires to businesses that received over $2M in PPP funding. This adds yet another layer of complexity – and scrutiny – to a program that has been filled with twists and turns from its inception.
The Issue
While many agree that transparency is necessary in financial transactions such as these, the catch here is in the content of these questionnaires. When the PPP rolled out in April, businesses only had to prove that they were being negatively impacted by the pandemic at that time. This new questionnaire seems to ask for significant documentation on how the company has fared during the pandemic. This isn’t that alarming unless one considers that the SBA may use the answers to this questionnaire to determine forgiveness eligibility for these companies, something that wasn’t on the radar when these companies applied for PPP loans.
Says Tenley Carp, PPP expert and partner at law firm Arnall Golden Gregory LLP, in an article in the Kansas City Business Journal, “It is currently unclear whether SBA plans to use these loan necessity questionnaires to deny PPP loan forgiveness and/or investigate companies for fraud. But one thing is very clear: It would be incredibly unfair if SBA used these questionnaires to do either of those things.” The SBA has yet to clarify how these questionnaires will be used.
Where It Stands
Businesses have until November 25 to weigh in with comments or feedback on these forms. If approved, the questionnaires will be sent to PPP recipients’ lenders to distribute for completion within ten days. Failure to comply may result in the SBA’s determination that the business was not eligible for the PPP, the loan amount, or forgiveness of the loan.
Call Adams Accounting Solutions for Help
Adams Accounting Solutions stays on top of the latest PPP news so that you don’t have to. We specialize in small business accounting and tax preparation and help our clients plan for the future. If you have questions about the PPP forgiveness process and how it affects you, give us a call at 913-888-9100.
