Today marks one month since CWA closed its offices. The last month has been an unprecedented time in both U.S. and world history. There are many states where practices will begin opening around May 1st and there are several other states that may remain closed for most of May. The ADA is tracking state mandates and regulations on their site, which you may find helpful.
This past week has been stressful for many as the SBA announced on Thursday, April 16, that the $349 billion stimulus funding for the Paycheck Protection Program (PPP) loans was exhausted. While some practices decided to go ahead and apply and have already begun receiving funds, most elected to delay upon guidance to try to correspond closer to opening your practice, and thus secure a higher rate of loan forgiveness.
Even the WSJ recognized the struggle today as they commented on PPP loans funding prior to re-opening, “The problem for business owners is that many can’t predict when the economy will normalize and don’t know whether they will be in a better position to pay workers two months from now.”
It is difficult for a business owner to make decisions without knowing when and how they can re-open, and without guidance on how the PPP loan will ultimately be forgiven. It feels as if each time a new Interim Final Rule (IFR) is released, benefits for business owners become increasingly narrowed. CWA believes the latest IFR foreshadows future guidance on the forgiveness of PPP loans for all self-employed individuals, whether sole proprietor or incorporated. We discuss this in more detail in our blog.
Any amount not forgiven and kept by the business owner must be amortized over 18 months after the 6-month deferral. This could create an average monthly payment of $3,000 to $5,000 a month based on a $100,000 loan with only 20% to 40% forgiven.
All signs point to more funding, but the timing is currently unknown. The longer the delay right now the better, and the more likely the receipt of your PPP funds will be closer to your re-opening date. The more the proceeds can be spent when the business re-opens, the higher chance a business owner has at forgiveness.
For those of you who have not yet applied for your PPP loan, I wanted to make the following recommendations:
- Contact the bank you are using and make sure that the bank has your PPP loan approved. The loans must go through underwriting and be approved by the bank before entering into the SBA E-Tran system. If your bank tells you they are not accepting applications until more funding from the government, this could possibly delay your funding or cause no funding if the second round of funding goes fast. You may want to look into working with another bank that is still accepting outside applications.
- Read the blog we posted this week that reviews the decision process many business owners have followed and how best to make a decision with the information you have today. I also suggest you read our summary and guidance on the application for a PPP Loan by Sole Proprietor and Independent Contractor as it offers insight into how the forgiveness process may work for all business types.
As we have been, we will update you as this continues to develop. We will continue to evaluate the situation to make sure clients are utilizing every resource available to help their business during this time. As SBA guidance continues to evolve, we will update our recommendations surrounding PPP if necessary.