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Thursday, 21 May 2020 18:38

PPP Borrowers: The Gleam is Off and Beware the Taxman Cometh

Written by Kent Carlson


When the Paycheck Protection Program was announced as a part of the CARES Act in late March, the general consensus among small business owners was that this sounded too good to be true.

The original demand for these funds overwhelmed banks and the SBA and many businesses were left without loans when funding was exhausted in less than two weeks.


Congress quickly refunded the program. But despite the pent-up demand, estimates the funding would also be exhausted very quickly, and the banks and SBA being more prepared to handle requests, there remains about $130 billion in funds available three weeks after businesses could begin applying. Why?




Over the past several weeks, the SBA and Treasury have flip-flopped in providing guidance on the most basic of issues---who qualifies for this program?


While attempting to dissuade large, valuable public companies from using the program, they overreached and issued unclear guidance that led many small, private companies, the very companies Congress specifically intended to help, to question whether they would get into trouble by participating. After leaving these businesses in the dark for more than two weeks, the SBA and Treasury finally came out with guidance that reassured borrowers who had received loans of less than $2 million they would be deemed to have had the economic need necessary to qualify for the program.


The SBA and Treasury were also unable to provide guidance on how businesses could apply for and how the amount of forgiveness would be determined until this past week, six weeks to the day since the program went live.


In the meantime, businesses that were among the first to receive approval of their PPP loans have had to make many decisions without adequate information, as they are quickly running out of time to spend the funds to qualify for loan forgiveness. And while the Loan Forgiveness Application answers some questions, by no means does it answer all, which will leave borrowers where they have found themselves often over the past two months---confused and frustrated.

We can hope that more questions will be answered and the answers will be more complete in the days ahead, but they may come too late for many businesses to take steps to maximize their loan forgiveness. The continuing uncertainty and the missteps the SBA and Treasury have made in overseeing this program are likely contributing to the current lack of interest being shown in this program which, at one time, had businesses scrambling to participate.

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