Challenges facing receiving the PPP loan

A second round of the Paycheck Protection Program (PPP) was distributed on April 27. However, ‘murky’ is only one way to describe the process of navigating what these loans will mean for small business borrowers.

The Treasury announced these guidelines for PPP loan forgiveness. It opens with:

“The loan amounts will be forgiven as long as:

• The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
• Employee and compensation levels are maintained.”

While this all may seems straight-forward, accurate reporting will be key receiving full forgiveness.

Here is a list of challenges facing small business borrowers:

• Computing the forgiveness amount
  The American Institute of CPAs has a five-step guide. The amount of forgiveness can be reduced if loan spending doesn’t meet guidelines.
• Tracking allowable expenses
  Using spreadsheets and accounting software can help borrowers manage their loan spending.
• Filing taxes
  Although PPP loans are not classified as income under the CARES Act, CPAs expect some confusion as IRS Code Section 265 rejects deductions for “otherwise allowable expenses that are allocable to exempt income.”

Financial technology companies (fintech) are rising up to alleviate some of this loan headache.
As of this publication, most banks do not have the systems needed for PPP loan borrowers to report the data required for forgiveness. Here is a list of fintech companies helping to address the process:

• Alpharank
  Their application runs through a bank’s website to gather spending data from a small business’ transaction history and can function like familiar accounting software like Quickbooks. Additionally, the application can direct borrowers through the reporting process and compiling “attestations” (evidence) which are necessary to comply with the SBA’s forgiveness requirements.
• Boss Insights
  Their Boss CARES platform integrates company financial, payroll, and accounting systems while monitoring the PPP loan forgiveness calculations.
• FINSYNC
  Their forgiveness application includes helpful features such as a guide, calculator, optional cash flow managements tools, and a clear document submission portal.

Lend Academy has published a list of fintech companies working to address the PPP loan forgiveness process.

A report by Forbes covers the challenges facing the banks as small business borrowers turn to them with PPP questions and concerns.

Anecdotally, The American Genius applied for the PPP loan in the second round and noted in the SBA closing documents indicated that the company can APPLY for forgiveness after 8 weeks. Previous language has made it seems as though forgiveness is a given. Just one more caution for borrowers: take care to read the fine print.