Nonprofit PPP Loan Forgiveness Application Is Now Online! VISIT HERE TO DOWNLOAD PPP LOAN FORGIVENESS APPLICATION Your nonprofit is expected to complete the application and submit it to your lender, who will ultimately be responsible for assessing forgiveness. The application requires that charities submit the forgiveness calculation form and an additional schedule. The process can be completed electronically. Notably, the form asks whether borrowers received a loan in excess of $2 million. Not only did the government indicate its plans to audit all loans over $2 million, but also charities receiving those loans will be required to show the money was necessary to keep operations running and they had limited access to other sources of liquidity.
The 11-page application document contains measures that will benefit charities, including an option that lets nonprofits calculate payroll costs using an “alternative” eight-week covered period that aligns with their regular payroll cycles. It also includes an exemption from the loan forgiveness reduction for borrowers who have made “a good-faith, written offer to rehire workers that was declined.”
Charities will be able to count any payroll and eligible non-payroll expenses incurred — but not paid — during the covered period, as long as they are paid by the next regular payroll or billing date. There had been concerns that only expenses that were paid during the covered period would be allowed to count toward forgiveness. The agencies did not reduce a requirement that 75% of the borrowed funds be used for payroll. The stipulation was not written into in the language of the coronavirus stimulus package that created the $660 billion lending program. The SBA and Treasury added it in regulations implementing the program.
The government said more guidance is forthcoming to assist both nonprofits and their lenders as they begin the process.
PPP is designed to incentivize nonprofits with fewer than 500 employees to keep staff despite difficult economic conditions that have resulted from the coronavirus pandemic. Applicants can receive up to $10 million – at least 75 percent of the money must be put toward payroll costs, while the other portion can be used for mortgage interest, utilities and rent.
As previously reported by INSIDE CHARITY, it may not be as simple as we thought to have loans completely forgiven. One of the first issues is that while loan amounts are based on either 2.5 times average monthly payroll costs for 2019 or the trailing 12 months (up to $10 million), the window to use it is only eight weeks. The loan amount is also based on prior staffing levels – before many charities laid people off or reduced salaries. Therefore, it may be even more difficult for a nonprofit to use at least 75 percent of their loan on payroll.
Forgiveness will be prorated if payroll isn’t maintained at levels seen before Feb. 15 – so it will be reduced proportionally to how many jobs were cut or the amount by which salaries were reduced. It will also be reduced if you don’t follow the allocation specifications. However, complete forgiveness doesn’t need to be the end goal for every nonprofit organization. The loan has a low, 1 percent interest rate over the course of two years – and no payments are necessary during the first six months.
As of Tuesday, the SBA said paycheck protection lenders had distributed more than $191.3 billion, and the average loan size was about $72,296.
On another important note earlier this week the SBA shared much needed guidance in their UPDATED PPP LOAN FAQ. Before the FAQ update, charities who received PPP Loans faced a painful lack of clarity regarding loan certification and loan forgiveness. For that reason, Frequently Asked Question #46 is a godsend. It makes clear that “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” While this does not forgive or excuse mistakes, misstatements or, worse, fraud, it gives existing PPP borrowers a degree of clarity at a time when we still don’t know how the coronavirus pandemic will play out. When can certainty be achieved? Not for a while, making FAQ 46 a welcome relief.
Remember what we shared last week. Your bookkeeper or CPA needs to become an expert in PPP Loan Forgiveness TODAY. You’re accounting systems need to be restructured in ways that track both EIDL and PPP income while simultaneously recording expenses that can be forgiven. As I shared last week YOU DON’T have till next years tax season to straighten this out. YOU ONLY HAVE EIGHT WEEKS. You thought getting the loan was tough. Well, you may be already behind if you’re counting on forgiveness.
Nonprofit PPP Loan Forgiveness Application Is Now Online was first posted at INSIDE CHARITY
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