PPP Forgiveness Provisions and the Problems Involved

By: First Union


PPP Forgiveness Provisions and the Problems Involved

Millions of small businesses across the country are struggling; the PPP funds were supposed to help many of them survive during this period of crisis, and yet because of some major problems as far as PPP forgiveness, a lot of those small companies may not make it after all.

To put it bluntly, the forgiveness provisions associated with PPP are in a complete state of disarray at the moment. There is major confusion regarding payroll versus non-payroll expenses. This, in turn, has created a great deal of turmoil within the dynamics of the businesses themselves. Instead of simplifying the program and offering small US businesses grants under the stimulus package, the Treasury opted to devise a very complex system that in many respects makes no sense. For a PPP loan to be forgiven, an employer has to hire workers back for a minimum of 8 weeks. However, the problem that arises is when there is no work for employees, or worse, the business isn't even opened yet.

Some Fundamental Problems

This serves only to cause stress and frustration for both business owners and their employees. For companies that were able to continue operations throughout COVID-19, this doesn't present as much of an issue. It is when a business had to shut down and is now either in the process of slowly opening under severe limitations or still cannot open because of state mandates that the forgiveness provision does throw a major wrench into their ability to have their loan forgiven.

Another major problem connected to the forgiveness provision is that by and large, it is open to interpretation. In other words, no one is necessarily on the same page as far as the criteria. Plus, each bank has their interpretation, so what may be fine for one bank might not apply to another.

And then, of course, you have the very huge issue of employers and employees being pitted against one another. Some employees are hesitant to return to work, especially if theirs is a close-contact environment. The business owners, however, trying to meet forgiveness requirements, have no choice but to force employees back to work or else fire them. Not to mention, because businesses are generally facing reduced demand, many owners are cutting hours back. And so in returning to work, employees are dramatically losing out.

Finding a Solution for PPP Forgiveness

For small businesses to stay afloat and for employees to be able to survive, PPP forgiveness needs to be fixed right now. A few potential solutions:

  • Let businesses turn their PPP loans into grants. For those who borrowed less than 100k, allow those loans to simply be forgiven regardless.
  • Extend the eight-week provision to something more realistic; i.e. let this period begin at least eight months after the business opens upon emerging from a lockdown situation.
  • Allow businesses to deduct any expenses made with PPP as business expenses. As it stands now, expenses made with PPP money are not tax-deductible.

At First Union Lending we are here to help. If you need extra cash to help carry your small business through, to cover payroll, or for whatever project you have in mind, we have a loan solution that will work for you!

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