While the deadline for applying for loan forgiveness is ten months after the end of the covered period, the inclination to start the loan forgiveness application process sooner rather than later is understandable. But there still may be reasons to wait.
Based on what we know at this time, this is was what we recommend.
Reasons for Waiting
- PPP loan recipients who have not used up their PPP funds should generally wait to apply until the funds are used in their entirety. There may, however, be some exceptions to this general rule.
- For PPP recipients who have used up their funds, they still may want to wait to apply. First, the SBA just recently opened the PPP loan forgiveness portal, and there are certain to be some problems. Furthermore, most banks are still not ready to accept applications.
- Second, Congress may once again make some changes to the law, and each time there have been changes, the rules have become more generous. For example, one possible change that has been proposed is to exempt loans under $150,000 from having to provide documentation.
Reasons for Applying Right Away
- Current guidance suggests that the headcount test applies to the time-period that ends the date the funds are exhausted. It is possible however that this rule could be clarified so that a borrower who uses the 24-week covered period is subjected to an FTE test for the entire 24-week period, even after the funds are used up. While this is not likely to be an issue, a borrower who is facing an FTE reduction after the funds are used up may want to apply sooner rather than later.
- A borrower who is in the process of a merger or acquisition may want to apply early to so that the PPP loan can be removed from their balance sheet as soon as possible.
As more information becomes available, we will keep you informed.