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Small businesses received answers to some questions following Friday’s release of the Paycheck Protection Program’s loan forgiveness application, but concerns remain for many small businesses, especially those that have not yet reopened.
The loan program created by the CARES Act allows small businesses and nonprofit organizations to receive forgiveness on PPP loans if at least 75 percent of the proceeds were used for payroll costs and the rest went toward other eligible expenses during the eight weeks after the loan was disbursed.
The U.S. Small Business Administration said on the application that business owners could begin the eight-week period on the first day of the next payroll period if the loan proceeds were received in the middle of a pay cycle. The application also clarified that costs incurred but not paid during the eight-week period would be eligible for forgiveness.
Small business owners will still be able to receive forgiveness for payroll costs even if there were staff reductions, according to the application, as long as the employees voluntarily resigned during the eight-week period, asked to have their hours reduced, were fired for cause or declined a written offer to be rehired.
But the loan program remains troublesome for many small business owners. The American Institute of CPAs (AICPA) said in the statement that the application addressed some issues for small businesses but did not provide enough flexibility for the small business owners who received loan proceeds.
“It’s clear the application form and instructions provided [Friday] are not enough,” Erik Asgeirsson, president and CEO of CPA.com, the AICPA’s business and technology arm, said in a statement. “Some of the most pressing issues are not addressed and in other areas it appears new questions have arisen.”
John Geraci, a CPA with LGA in Woburn, told Banker & Tradesman that the SBA still needs to address key issues. He said the forgiveness application made sense for businesses that continued to operate during the shutdown but poses problems for small businesses, like restaurants, that still have not been able to open and will likely not return to full capacity for some time.
Another issue, Geraci said, is that businesses continue to receive loans even though there is less than eight weeks remaining before the program’s June 30 deadline.
“Congress needs to act soon, and they need to act fast,” Geraci said. “It was obvious on April 3 that there were a lot of businesses that were going to need guidance on forgiveness.”
The SBA said additional guidance on forgiveness would be coming, and members of Congress have been working on changes to the PPP to address business owners’ concerns.
The AICPA said that small businesses should have more flexibility for determining when to start the eight-week period or extending the period beyond eight weeks.
