We and others have written extensively about the PPP loan. The PPP loan was enabled by CARES legislation, and has been managed by the SBA, in conjunction with SBA lenders. For loan amounts of less than $2 million, the safe harbor qualifier for loan forgiveness is whether the applicant, at the time of application, deemed that business uncertainty due to government action taken as a result of the C-19 virus warranted the application and receipt of funds.

We have been asking ourselves whether we apply for loan forgiveness or whether we simply repay the loan. We have thought about the CARES Act and other 2020 legislation, and the role and place of this type of government benefit in American culture and history. We have also given thought to the law of unintended consequences, and the very long tails which come with decisions. Given that, we have been evaluating the PPP loan through the prism of Demand, Dependence, Disclosure and Deductibility. Each of these come with nuances which will be specific to each situation. Let me explain.

Demand

The intent of the original legislation was to offer financial support to businesses who were severely impacted by federal and state closure actions. 90 days into this, have our businesses experienced such a loss in revenue that we can say there is a significant demand in our business, for these funds, in order for us to stay viable? Or has our business revenue been surprisingly resilient, especially considering the unknowns and uncertainty so prevalent in March and early April?

Dependence

Some of you reading this believe that God is your provider. For those of you who believe this, is the PPP loan God’s provision through the instrument of government? Or is the PPP loan reliance on the State, rather than a reliance on God’s provision?

Disclosure

The PPP loan forgiveness application requires you to list business mortgage interest payments, lease or rent payments, utility payments, and significant detail on eligible payroll and non-payroll costs. Since this is loan forgiveness, I’m certain they have all rights to ask these questions. Are you comfortable releasing this significant amount of detail on a privately held business to the federal government?

You are also affirming by your signature that all funds were used as intended, and that the information submitted is true and correct. You are also giving the SBA (and potentially other government agencies?) the authority to request additional information, to assure that you qualify for such forgiveness.

For those of you who work for or own entities regulated by the SEC, this is a required disclosure on your U-4. Basically a Yes answer when most of us prefer all No answers. Is that what you want?

Deductibility

On April 30, the IRS in Notice 2020-32 said that expenses paid with funds forgiven through the PPP loan process were not deductible. Both Senate Bill 3612 and the House-sponsored HEROES Act address this notice, by restoring deductibility of business expenses. As of this writing, no final legislation has been passed and signed into law. We fully expect such legislation. I do wonder though, what other opportunities the government may take to make inquiries of us, if we were recipients of loan forgiveness.

Summary

As with almost all decisions, there are no good or bad, right or wrong answers to these questions. There are simply well considered decisions.