As we previously blogged, Congress established the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This $669 billion-dollar loan program was designed to help businesses negatively affected by COVID-19 continue to pay their employees. The program came to an end on August 8, 2020 with over $134 billion in funds left on the table, and on August 10th the Small Business Administration (SBA) opened up the forgiveness portal. However, businesses that received PPP funds may want to strategically consider whether they want to immediately apply for forgiveness.
Since the program was introduced in April, it has undergone a series of changes, and the SBA continues to issue guidance and clarification in the form of FAQ’s. Most recently, the SBA clarified on August 11th that PPP funds spent on vision and dental benefits are considered “group health-care benefits” and therefore eligible for forgiveness as a “payroll cost.” As updates like these continue to roll out, businesses may want to adopt a “wait and see” policy. The forgiveness process is likely to change in the coming months, and it may be wise to see how these changes play out rather than dive into the process right away.
Many lingering questions remain regarding PPP forgiveness. Borrowers still do not have complete clarity on all the expenses that qualify as “payroll expenses” or what to do if they use all of their funds before the 24-week covered period ends. Additionally, borrowers are waiting on Congress to pass proposed legislation that would simplify the loan forgiveness process and allow them to apply for additional PPP loans. Borrowers are also waiting on legislation that would allow expenses covered by PPP loans to be deductible on tax returns. In light of this uncertainty, many borrowers are opting to see how things play out in Congress before they apply for forgiveness.
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