Business leaders and the CPAs who serve them will need to use a variety of strategies all at once as they pursue economic support in the newest round of Paycheck Protection Program (PPP) funding.
Borrowers will need to be aggressive, as the AICPA has mentioned, to get applications filled out in a timely fashion. They will need to be patient, as the U.S. Small Business Administration (SBA) and Treasury may take more time than in the past to screen applications and reduce the risk of fraud. Finally, borrowers will need to be vigilant and watch for changes to guidance that might affect their applications, funding, or loan forgiveness.
“Overall, the process isn’t new,” said Kari Hipsak, CPA, CGMA, a senior manager with the Association of International Certified Professional Accountants. “So at least there’s familiarity with the program and how to go through the program. There are changes, though, in the new round of PPP funding, so as before, everyone will have to stay cognizant of any new rules and regulations, but the familiarity of the program should help.”
Following an early opening for community financial institutions, the PPP opened for first-draw and second-draw loans from lenders with $1 billion or less in assets Jan. 16 and began accepting applications from large lenders Tuesday.
Some lenders are requiring PPP borrowers to apply for forgiveness on their first-draw PPP loan before they file to seek a second-draw PPP loan. This is not a requirement of the SBA and Treasury, which run the PPP, so CPAs may want to encourage business clients to consider other lenders that will process the second-draw loan application without the business having to file for forgiveness on their first PPP loan.
CPAs and their clients should also know the following as they participate in the latest round of PPP funding:
Data is critical. The first step in applying for a PPP loan is gathering all the relevant data borrowers will need. Information such as average monthly payroll amounts and (for second-draw PPP borrowers) quarterly revenue comparisons is necessary.
As a resource in gathering the necessary data, practitioners can use a financing platform for CPA firms, the CPA Business Funding Portal, which was created by the AICPA, CPA.com, and fintech company Biz2Credit to assist with PPP loan forgiveness and has been updated to accept applications for the latest round of PPP funding. The CPA Business Funding Portal started submitting applications Jan. 15.
“Take the time to make sure the correct data is submitted,” Hipsak said. “This program isn’t new anymore, but there are changes [in the second-round rules]. Make sure you’re aware of the changes. Make sure your clients are aware of the changes, and make sure that they’re integrated into any application you submit.”
CPAs need to be aware of the differences between first-draw and second-draw loans and understand that second-draw applications require borrowers to prove they have experienced at least a 25% reduction in gross receipts as a result of the pandemic.
Gather and keep documentation. Retaining documentation that backs up the information submitted in application forms is critical.
“Be prepared,” Hipsak said. “Supporting documentation for the average monthly payroll calculation used to calculate the maximum loan amount can be obtained from clients to support those amounts they come up with and will be helpful in the future, as it drove the amount of the PPP funds the borrower received.”
Understand the new expenditures eligible for forgiveness. New guidance makes certain covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures eligible for PPP forgiveness.
“They are applicable to past and future loans unless the loan has already been forgiven,” Hipsak said. “You can’t go back and make adjustments to the loan if it’s done. If you haven’t submitted your PPP forgiveness application, there’s an opportunity to go back and use those additional expenditures because the act did make them retroactively available.”
Prepare for possible new clients. The latest round of the PPP opens funding to certain categories of clients that weren’t permitted to apply for earlier PPP funding.
Certain 501(c)(6) not-for-profits, such as chambers of commerce; destination marketing organizations; certain housing cooperatives; and some local newspapers, TV, and radio stations may now apply for PPP loans. Borrowers’ eligibility is subject to certain restrictions. Be sure to review all eligibility criteria when applying for PPP funds.
Be prepared for a longer approval process. It may take a bit more time for the SBA to approve PPP funding than it did the last time because reviews are being done more carefully to check for potential fraud and validate applications.
Hipsak said it’s important to assume good intent on the part of the SBA as it seeks to help businesses and the economy weather the pandemic.
“Let’s keep in mind that everyone is trying to ensure that the funds are used appropriately,” Hipsak said. “That means that when you go into the PPP application, make sure the correct data is submitted to avoid drawing out the review process.”
Watch for updates. Changing guidance is an almost inevitable feature of governmental programs that are rolled out quickly.
“Be aware of what’s happening,” Hipsak said. “We’re getting new guidance frequently.”
Attending AICPA Town Halls, seeking other AICPA resources, and reviewing JofA updates can help CPAs remain informed. In addition, a summary of the PPP and the changes made under the Economic Aid Act is available for download in PDF format. Users must have or create an aicpa.org user account to access the document, but the PDF and the user account are free.
Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.
AICPA experts discuss the latest on the PPP and other small business aid programs during a biweekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.
The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director. Jeff Drew, a JofA senior editor, contributed to this article.