Advisors still have many concerns and questions about the loans made available under the Coronavirus Aid, Relief and Economic Security Act’s Paycheck Protection Program, according to executives at financial services consulting firm DeVoe & Co. and Live Oak Bank, as well as the several RIAs who asked them questions Tuesday during the webinar “Breaking Down New Guidance on PPP Loan Forgiveness.”
“There are a number of people who question why an RIA would accept the funds in the first place,” said Brad Grubb, DeVoe & Co. managing director.
Despite that, “a number of RIAs have taken advantage of the loan program, which promotes a key benefit of forgiveness if you follow” the guidelines provided by the U.S. Small Business Administration, he said. Advisors, however, are still getting up to speed on the guidelines, he added.
“When talking about loan forgiveness, first, I’d like to say that, there’s still a lot we don’t know,” according to Mike McGinley, executive vice president of small-business banking at Wilmington, North Carolina-based Live Oak Bank.
He pointed first to the interim final rule that the SBA recently released concerning loan forgiveness applications submitted under PPP. The published forgiveness application, meanwhile, is “going to drive a lot of this conversation,” he said.
On top of that, “there’s still some legislation out there that could change what the forgiveness application looks like,” he said, pointing to the Paycheck Protection Program Flexibility Act that House lawmakers passed May 27.
Steps Advisors Must Follow
Form 3508 is broken up into four components: the Loan Forgiveness Application Form, PPP Schedule A (required), PPP Schedule A Worksheet (required) and PPP Demographic Information Form (optional), McGinley noted.
Once the form is submitted, the lender has 60 days to issue a decision to SBA, and then once the SBA receives the decision from the bank, SBA has 90 days to remit the forgiveness amount and any accrued interest to the lender, he pointed out.
Payroll expenses make up 75% of the forgiveness calculation, but “that could change as a part of the proposed legislation” by the House, he added.
For advisors applying for a PPP loan, he recommended working with a CPA who “will help them work through the application, which is a little bit of a bear to get through.”