Unanswered Questions about PPP Loans Create Confusion, Anxiety

Date June 16, 2020
Authors Amy M. Reynallt
Categories

On June 8, the Small Business Administration and U.S. Treasury issued a joint statement indicating that guidance and a new PPP Loan Forgiveness Application would be released “promptly.” While we wait, borrowers are confused and anxious. Some of their most frequent asked questions:

Should I choose the eight-week period or the 24-week period?
We believe this will be an individual business decision. No clarity has been forthcoming on the Paycheck Protection Program Flexibility Act (PPPFA) provision, including when or how a borrower must make this election. Similarly, because the revised PPP Loan Forgiveness Application has not been released, questions remain as to how the application and related guidance may affect a borrower’s decision to select the eight-week or 24-week period.

Will my loan be on my books at the end of the year?
It’s possible. While we expect guidance on when borrowers can apply for forgiveness, we know forgiveness will need to be approved. Borrowers may find their balance sheets reflect their PPP liability at the end of the calendar year.

Have any definitions been clarified?
Unfortunately, there has been no guidance that provides clarity on definitions such as “owner-employee,” “transportation” as an approved utility, or for other terminology that has not been defined. Further, there is no indication of which definitions might be clarified in the coming weeks.

Are borrowers previously charged with certain crimes eligible for PPP loans?
On June 12, a new Interim Final Rule was released to loosen the eligibility criteria for these borrowers. It states that borrowers are ineligible if “an owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year.”

While we wait for more guidance, or with any of your questions or concerns about the Paycheck Protection Program, the Paycheck Protection Program Flexibility Act, or your business’s loan, please contact your HBK Advisor.

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