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Financial Planning > College Planning > Student Loan Debt

Treasury, SBA Release PPP Loan Forgiveness Application

By Melanie Waddell

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The Treasury Department and Small Business Administration late Friday released a Paycheck Protection Program Loan Forgiveness application along with instructions on how to apply, consistent with the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

SBA also said that it would soon issue regulations and guidance to further help borrowers apply, as well as to provide lenders with guidance on their responsibilities.

Leon LeBreque, chief growth officer at Sequoia Financial Group in Troy, Michigan, told ThinkAdvisor in a Monday email message that while he was “excited” to see the guidance, there were “still holes.”

Ed Mills, policy analyst for Raymond James, told ThinkAdvisor that the Treasury and SBA guidance comes as “we’re getting closer to phase 2 [of the PPP program], which is the forgiveness [aspect]; we need to tell banks and businesses exactly how this works.”

The CARES Act left questions, for instance, on how to calculate employment and what needs to be done before June 30, Mills said.

Meanwhile, lawmakers are said to be planning changes to the PPP program. Late Friday, the full House passed the Democrats’ $3 trillion coronavirus stimulus package by a narrow 208-199 vote. H.R. 6800, the Heroes Act includes measures such as making expenses covered by forgiven Paycheck Protection Loan funds tax-deductible. The bill now heads to the Senate but passage is unlikely. No Senate vote has been scheduled as of yet. President Donald Trump has vowed to veto it.

The Treasury and SBA guidance sets out the following “to reduce compliance burdens and simplify the process for borrowers,” including:

  • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles.
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan.
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30.
  • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined.

But LeBreque explained that the guidance fails to include definitions of who is an employee and it also “seems unlikely many entities will get full forgiveness.”

Further, LeBreque said, there’s “lots of documentation required,” and “owners are restricted in their costs, so no payroll taxes or health insurance for owners seems available for forgiveness.”

LeBreque said he hopes more guidance comes before the forgiveness period, which depends on when a loan was awarded. There’s an eight-week period in which forgiveness is calculated. “I’d be nice for the 20 million or so businesses (and their CPAs!) who are trying to get the loans to understand how this will actually work. I love the concept of helping small businesses, unfortunately, the devil’s in the details.”

— Check out more ThinkAdvisor content: Coronavirus Guidance for Financial Advisors

Melanie Waddell

@Think_MelanieW

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