CARES Act: What Just Happened? Week of October 23, 2020

Kranz receives updates on the CARES Act and how businesses respond to impacts of the coronavirus through communications with our consultants, valued clients, partner firms, and legal and tax service providers. In our commitment to keeping you informed, we hope that sharing this information regularly is of value to you.

PPP FAQ and Interim Final Rule Updates

Between the beginning of April and the end of August, the Treasury issued 24 Interim Final Rules and answers to 51 specific PPP-related questions, which provided guidance and clarification about the program’s deadlines, forms, qualifying expenses, calculations, lender requirements, borrower appeal rights, and other important topics. One additional Q&A, #52, was added on October 7:

Q 52: The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period). Previously, the deferral period could end after six months. Are lenders and borrowers required to modify promissory notes used for PPP loans to reflect the extended deferral period?

A: The extension of the deferral period under the Flexibility Act automatically applies to all PPP loans. Lenders are required to give immediate effect to the statutory extension and should notify borrowers of the change to the deferral period. SBA does not require a formal modification to the promissory note. A modification of a promissory note to reflect the required statutory deferral period under the Flexibility Act will have no effect on the SBA’s guarantee of a PPP loan.

Loan Forgiveness Update

An important change to the loan forgiveness regulations and the process was made October 8 when the Treasury released Interim Final Rule 25 – Additional Revisions to Loan Forgiveness and Loan Review Procedures. This rule addresses a key issue for borrowers and lenders – how to handle the forgiveness process for loans of no more than $50,000, representing 69% of all loans made but just 12% of total loan value. Interim Final Rule 25 introduces a new single-page loan forgiveness form, 3508S. This IFR and form:

  • Affirms that borrowers with affiliates can use this form provided that the aggregate value of their PPP loans does not exceed $2 million.
  • Affirms that the borrower is exempt from any reductions to the forgiveness amount based on FTE reductions or employee salaries or wages that would otherwise apply.
  • Requires the borrower to certify that the loan:
  • Was used to pay costs eligible for forgiveness,
  • Includes payroll costs equal to at least 60% of the loan amount,
  • Was not used to pay compensation for anyone earning above $100,000 annually
  • Other certifications required of the borrower include:
  • Their understanding that the government can pursue civil/criminal charges if loan funds were used inappropriately
  • That accurate calculations were made of eligible payroll and non-payroll costs
  • That accurate calculation was made of the forgiveness amount requested
  • That required documentation has been submitted to the lender
  • That all information provided is true and correct and that criminal penalties could be incurred if that turns out not to be the case
  • That tax documents submitted to the lender are consistent with those submitted to the IRS
  • Their understanding that the SBA may request any additional information required to assess the borrower’s loan and forgiveness eligibility

Lender Administration of PPP Forgiveness Applications

On August 10 the SBA launched its web portal for PPP lenders to submit their decisions regarding borrower loan forgiveness applications. Borrowers may submit their loan forgiveness application to the lender once their loan covered period has ended (or prior to that if all loan funds have been expended) and must submit the application prior to ten months after the end of the covered period.

Since our last update three weeks ago many lenders, including several among the top ten shown below, have begun accepting forgiveness applications from borrowers. Here is the current application processing status for the fifteen lenders with the highest dollar value of loans as taken from the Treasury’s website.

(Updates since October 2 are underlined, lenders accepting forgiveness applications are in bold.)

Accepting Applications

  • Bank of America – Bank website acknowledges that borrowers who’ve already submitted a forgiveness application may want to now consider using Form 3508S. Access to the bank’s portal is provided to borrowers through an email link.
  • TD Bank – Accepting forgiveness applications through their online portal which opened in September.
  • S. Bank – Now accepting applications. Borrowers provided access to their application portal via email.
  • Zions Bank – Accepting forgiveness applications through their online portal which opened in July
  • M&T Bank – Began accepting forgiveness applications through their portal on October 14
  • Huntington Bank – Accepting forgiveness applications through their online portal which opened in September.
  • Cross River Bank – Uses loan service provider, Scratch, to accept and process applications. Scratch online portal became available in September.
  • Fifth Third Bank – Began accepting applications this month through their online portal. Borrowers will be notified in phases through the end of September of the date they specifically can submit their forgiveness application.
  • Citizens Bank – Online application portal accepting applications.
  • BMO Harris Bank – Borrowers with loans greater than $150,000 can submit forgiveness applications through their online portal which became available in September. Borrowers with loans less than $150,000 are not allowed to submit forgiveness applications as the bank awaits new guidance from the SBA.

Pending Acceptance of Applications

  • Trust Bank – Date for accepting applications has been moved from September 21st to the beginning of October

Not Accepting Applications

  • JP Morgan Chase Bank – Not accepting applications and referring borrowers to their “Requesting Forgiveness through Chase” video which covers timelines, definitions, eligible costs, and documentation requirements.
  • PNC Bank – Not accepting applications as they continue to develop their digital PPP Forgiveness Application which is expected to launch in late August.
  • Wells Fargo Bank – Not accepting applications as they continue to develop their digital PPP Forgiveness Application. No estimate of when that will be accomplished is provided.
  • KeyBank – Website provides no information on the status of their application acceptance process or timeline.

Additional Resources

We recommend the following websites for additional information and guidance:

How Kranz Can Help

Kranz is ready to provide assistance with preparing accounting documentation for your PPP forgiveness application, and submitting a subsequent PPP loan request if they become available. If you have questions or would like help, please get in touch. Learn more about our other services here.