The economy has been devastated by COVID-19. This caused many businesses to shut down completely, while others are forced to operate on a restricted basis. As a result of these restrictions, many businesses are contemplating bankruptcy or are on the edge of failure. This is worsened by a high unemployment rate and limited consumer spending.
Through the CARES Act legislation enacted in March 2020, EIDL (Economic Injury Disaster Loans) and PPP (Paycheck Protection Plan) loans. Despite receiving billions in loans and grants, millions of small businesses are still in danger of going out of business.
What is the bank doing while small businesses are being challenged?
The bank is changing its view on PPP loans, refusing loan forgiveness under the PPP. This leaves a lot of unfortunate small businesses dangling on a cliff from which they can’t get back.
Not just one! Four small business owners stated their lenders notified them that they were not entitled to the funds they were approved for.
How to deal with a PPP loan that hasn’t been forgiven?
If you were approved for a loan after June 5, 2020, any unforgiven amounts will be converted to a five-year loan with a 1% interest rate. Loans authorized before June 5, 2020 transition to a two-year loan with a 1% interest rate. But you can ask your PPP lender for a five-year extension.
Payments on your loan will be postponed until:
- The day on which the SBA sends the lender the authorized forgiveness amount.
- The SBA decides whether or not a loan is eligible for forgiveness.
- Your opportunity to ask for forgiveness has passed.
You have several options if you have unforgiven loan amounts from your PPP funding.
- Take advantage of the loan’s liberal terms.
Your PPP loan offers even better conditions than normal SBA loans, with a 1% interest rate. It could be wiser for your company to bear any unpaid loan balance for the two or five years allowed. Because you didn’t have to put up any collateral or have perfect credit to qualify. You’ll have some breathing room as you figure out what’s next for your company.
- Pay back your loan right away.
Depending on the sum you owe and how you spend it, it may be a good idea to repay your loan immediately. There are no prepayment penalties or other costs if you do this. Paying off your debt quickly allows you to avoid collecting more interest over time.
Don’t use your loan for unapproved purposes just because it’s a two-or five-year loan. You must follow the rules that govern the use of funds that have been approved. Payroll-related expenditures and other chosen operating costs are covered by PPP loans.
Contact your lender if your PPP loan forgiveness request is denied. It’s possible that you’ll be able to submit additional paperwork to help with the approval process. Within 30 days following the denial, you can request that the SBA reconsider the lender’s decision to deny forgiveness.
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