Last Thursday, NPQ presented a detailed webinar with FMA about how to manage the Paycheck Protection Program (PPP) loans made under the CARES Act. We had 3,000 seats available, and yet we were seriously oversubscribed, as people struggled to understand the terms.
More distressing was the fact that we received about 1,300 questions from those attending. This reflects the continuing lack of clarity that has surrounded the program since its launch, when lenders did not themselves have guidelines until just hours before they were to use them.
The day before our Thursday session, the US Small Business Administration (SBA) released the guidance that recipients of loans of less than $2 million would not have their self-certification of need reviewed. We integrated that information, even as we acknowledged the many outstanding undecided questions that accompanied it.
Some of those questions have now been answered, as SBA and the US Treasury Department have finally released the application that PPP borrowers must use to have their loans forgiven. The application itself is 11 pages long, but it also comes with some long-overdue guidance for which borrowers have spent two weeks waiting.
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In what other situation would we have made such a business decision based on terms so profoundly unclear? And much remains unclear even now, halfway through the period to which the loan applies.
A number of the clarifications have to do with when costs can be incurred to be counted against the loan. (I recommend this article by Tony Nitti at Forbes to help you with the details.) The SBA says it further refining the details, but realistically these delays may end up costing loan recipients dearly.
Although the two federal agencies had been pressured to lower the requirement that 75 percent of the loans be used for payroll expenses, they did not bend on this central issue, even though that stipulation was not in the original stimulus legislation.
Long story short, our best advice is to stay tuned as we work with partners like FMA to keep track of the requirements. For many, these loans are a necessary bridge; it’s a shame it’s still being built as we’re trying to cross it.