With PPP at End, Forgiveness Is Next

YOUNGSTOWN, Ohio – Things have settled down somewhat in the world of business finance since the beginning of the coronavirus pandemic. The rules for the Paycheck Protection Program have been sorted out, the funds disbursed and, in many cases, spent. 

But that doesn’t mean it’s easy sailing from here. Business leaders still need to apply to have their PPP loans forgiven and still have to navigate a pandemic economy that’s not rebounding as quickly as anticipated.

“There’s still a large level of uncertainty. The consumer confidence of how things are going to look in six months is still up in the air,” says Josh Toot, vice president of commercial banking for Premier Bank. “That’s what drives a lot of business models that people deal with.”

One of the foremost concerns right now is the rules that surround having PPP loans forgiven. The initial rules of how PPP loans can be spent so they can be forgiven are the same as they were at the outset – funds must be used on payroll, utilities, rent or mortgage payments – but there are questions about issues such as the tax implications of having a loan forgiven or proposals that Congress is discussing.

“There’s the Heals Act that was in Congress [in late July] and proposals that would change some aspects of the Paycheck Protection Program,” says Amy Reynallt, who heads the PPP team at HBK CPAs & Consultants.

“There are still grey areas within guidance. We’ve seen borrowers who have high confidence that a large portion of their loan, if not all of it, is forgiven,” she says. “Generally, if clients have used the funds for the right purposes and maintained their wages and full-time equivalents, then they’re in pretty good shape to be in that position.”

Forgiveness applications – the Small Business Administration’s Form 3508 or 3508EZ, or a bank equivalent – are being accepted. But there’s no rush, according to Tim Petrey, managing partner at HD Davis CPAs.

“For anyone whose application doesn’t have a clear, defined yes-or-no answer, there’s no hurry to get that forgiveness application in,” he says. “It’s not like when we were applying and everyone was worried about when money would run out. It’s not like your chances of forgiveness are reduced if you wait.”

HD Davis has submitted a dozen forgiveness applications so far, he says, and is still waiting for approval on them. The batch was selected, he says, because they were cut and dried cases, where all PPP loan money was spent on payroll within the allotted 24 weeks of being disbursed.

“They’re the ones that are no-brainers. They already spent all the money. They retained all their employment. They just check all the boxes on the EZ form and it’s in,” he says.

Virtually all HD Davis clients spent their money within the bounds of the program, Petrey continues, noting that because the window to spend the money was extended to 24 weeks from the original eight, businesses that were “in some semblance of operation” had expenses that fell within guidelines.

Another reason businesses may want to wait to send in their forgiveness applications – no deadline has been set – is because of congressional negotiations, both on legislation and among the agencies involved, such as the SBA and IRS.

There may be something that comes up, Reynallt says, that could benefit business. Turn the application in too early and you might miss out.

“It’s certainly possible that a legislative change or a future guidance could really help a borrower. If there’s that possibility, they have to make that determination: ‘Do we wait and see if there is new legislation or do we go ahead and apply for forgiveness based on the guidance we have?’ ” she says. “They should keep an eye out on guidance from the SBA and the Treasury, as well as listen to what Congress is talking about and what they’re passing.”

Beyond the Paycheck Protection Program, businesses have sought other forms of pandemic relief, largely through their financial institutions. Deferments offered almost universally including “no questions asked if they asked for it” at Huntington Bank, says Bill Shivers, the bank’s Canton/Mahoning Valley regional president.

The bank announced Sept. 1 that it was committing $20 billion across its seven-state footprint through its new community plan, including $7.6 billion in capital for businesses, with a focus on minority-, female- and veteran-owned businesses.

“There’s so much insecurity and confusion right now – between social injustice, the economy and the pandemic – that now is the time to step up,” Shivers says.

The exact details of what forms that funding will take and how business leaders can gain access to it have not been completed, he adds, but notes it may include nontraditional lending products.

“We wanted to make the commitment in terms of the dollar amount now. It’ll probably be several programs,” Shivers says. “It’s going to be looking at if there’s a different, better way to finance than a traditional banking product.”

Overall, Shivers and Premier Bank’s Toot and its Mahoning Valley regional president, Frank Hierro, say, the pandemic hasn’t slowed commercial lending. While businesses like restaurants and entertainment venues still struggle, there are still plenty of sectors moving ahead.

“If it’s a business-to-business situation, in a lot of cases, many of them have figured out how to work in this era of COVID. They made changes and got lean again,” Hierro says. “You have businesses like trucking companies that naturally have a cycle of equipment. They’re still taking advantage of attractive interest rates. That segment is still doing well.”

Toot adds that low interest rates have kept business moves such as mergers and acquisitions or real estate purchases moving forward.

“I think it’s pushing people ahead with projects. We’re still busy,” he says. “People understand that money is cheap right now and it’s a good time to borrow. I haven’t seen many people pushing projects back. There are a few. But it’s not to the extent I think much of the public expects.”

And looking down the road, the accountants don’t foresee long-term hits to capital investments, although both Reynallt and Petrey note the financial stability of a business depends on the sector in which it operates.

“As we went into the pandemic situation through April and May, the Paycheck Protection Program and other government relief, and government orders, [clients] understood and expected that change was inevitable,” HBK’s Reynallt says. “They knew the lack of predictability would be the new normal. A lot of clients took that into consideration and flexibility became more important than ever.”

Like the Great Recession, Petrey adds, the businesses that emerge after the pandemic will likely end up with better-run companies. “Change can be the best thing you’re forced to do,” he says.

Reynallt suggests businesses look closely at their financials and see what’s changed during the pandemic and what hasn’t. Just as important is being realistic about what could happen in the next year.

“We’ve seen some clients who are struggling, some who’ve maintained their business and in some cases revamped to be better accustomed to the situation we’re in, and some who are doing better this year than last year,” she says. “We always want clients to plan for next year and what’s important is to be realistic about the possibilities. Consider goals for next year. Take advantage of relief programs that makes sense for your business.”