Four Reasons PPP Patience Pays
By Marilou C. Vroman, CPA, CFE
With all the changes in the PPP program, some dealers may be anxious to seek forgiveness and put the PPP process behind them. While most businesses are past the 8-week covered period, many are still well within the recently established 24-week covered period in which to spend the PPP funds. Here are some good reasons to wait before applying for forgiveness:
Banks are not ready to process applications – You might be ready with your documents and data but the bank which originated your PPP loan is not prepared to process SBA forgiveness applications and related data just yet, there are still key questions about the PPP which remain unanswered and are pending SBA and U.S Treasury guidance.
More time to use the funds for the purpose they were intended – Unless you have exhausted the funds on forgivable expenses already, you can continue using the loan proceeds for payroll and qualified expenses for up to 24 weeks, increasing the likelihood more of the loan will be forgiven.
Payroll reports – If your dealership is using a third party payroll processor, it is likely they are building reports which will provide key payroll information for forgiveness, saving critical time in determining items such as full time equivalents (“FTEs”) and salary and hourly wage reductions. (Note: we still encourage testing and validating these reports. Remember, “garbage in - garbage out”)
Technology is catching up – Tools are being developed to enable PPP recipients and their advisors to ease the burden of the complex calculations to apply for forgiveness. Once SBA guidance is finalized these tools will make the forgiveness application process more user friendly, and less costly from a time and resource perspective.
In the meantime, dealers can proactively organize payroll data, tax returns, leases, and other supporting documentation in preparation for the upcoming forgiveness process and to help mitigate payback exposure in the event of an SBA review. With many dealers having PPP loans in excess of $2MM, an SBA review of the loan and its potential forgiveness will likely become a reality, and this is certainly is something to plan for.