PPP Loan Forgiveness Update with Jason Rush

Today we release a bit early this week to talk about PPP Loan Forgiveness. Jason Rush, Chief Operating Officer at First United Bank & Trust joins us today to talk about PPP Loan Forgiveness, and some of the common questions that are being asked.

Transcript

Eric: Hey, this is Eric. Just wanted to give a quick mention at the top of this episode, we are actually releasing this episode early. So, normally, our episodes are every Thursday, so if you haven’t subscribed be sure to do that, but we are actually releasing this episode early this week because it has a lot of good information about the Paycheck Protection Program, particularly, the forgiveness aspect of it and we wanted to get this out as soon as possible to folks. So, we recorded this on September 4th. And then we have the holiday weekend. So, we’re putting this out on the 8th just to make sure that everyone has it as quick as possible into their inbox as you guys can listen. And if you have any questions or need anything, of course, you can always email us at podcast@mybank.com or you can visit us at mybank.com/forgiveness to learn more about the PPP forgiveness program. Thanks and enjoy the episode.

Announcer: Welcome to the “What Matters Most” podcast presented by First United Bank & Trust. That’s my bank. Visit us today at mybank.com.

Eric: Hello, and welcome to “What Matters Most,” the podcast all about finances, community, savings, and security for you, your family, and your business. This podcast is brought to you by the helpful folks at my bank First United Bank & Trust. I’m your host, Eric Nutter, and in today’s episode, what matters most is a PPP loan forgiveness update. And for this helpful and forgiving discussion, I am thankful to be joined remotely today by Jason Rush, chief operating officer at First United Bank & Trust. Good morning, Jason. How’s it going?

Jason: Good morning, Eric. It’s going well. How about yourself?

Eric: I’m doing great. I appreciate you joining me today. We’ve got a lot to cover. We’ve gotten quite a few questions over, I mean, gosh, the past three, four months about the PPP program, the Paycheck Protection Program, the loans. But in particular, the forgiveness aspect of those loans. And we’re getting to that period now where a lot of the borrowers are starting to hit that forgiveness period of time. And so, a lot of questions have been flying around either directly to our lenders or, you know, through email to us online. And so, we wanted to cover some of those common questions that we’re seeing and hopefully, you can help provide some answers to our listeners. Does that sound like a plan?

Jason: Sounds good. And I’ll do the best I can to answer whatever might be coming up, so glad to help.

Eric: Awesome. All right. Well, let’s start off with there was a change in the program along the way where originally it was an 8-week period and it changed where you could extend that period of time to use those funds out to 24 weeks. So, early borrowers that then select the 24-week covered period, can they apply before the end of the period if they’ve used up all the funds? So, they haven’t gotten through the 24-week period, but they’ve kind of gone through all the funds that they were allotted. Can they just start applying for forgiveness now, or how does that work?

Jason: Well, I guess to start with, you mentioned that there were…this was a change to the program and I guess one of the things that we should talk about early on is there’s been a lot of changes to this program. And you know, a lot of this was done on the fly. You know, Congress was doing their best to respond to the needs of the businesses. And you know, they put together something that they thought would work. SBA was, you know, tasked with a lot of this and they had to interpret some of what Congress put out there. So, they were doing things on the fly, and then, you know, the banks were the same way. I mean, they were trying to take what Congress was putting together, what the SBA was interpreting, and they were…

Eric: Make sense of it all.

Jason: …doing their best to just make the most of it all. So, I think you know, everything was with great intentions and you know, one of the changes that you mentioned was the covered period. Initially, it was 8 weeks then it got extended to 24, but I guess the good news from this is, you know, a borrower can choose what’s called the ulterior covered period or alternate covered period. And they can, you know, if they meet the requirements prior to that 24 weeks being up, they can go ahead and apply for forgiveness anytime during that period. So, between the 8 and the 24 weeks, you know, let’s say they get to week 13 and their payroll has exceeded the amount of their borrowings, they can go ahead and apply at that point in time and that’ll be just fine.
Eric: Awesome. Awesome. Yeah. Well, and speaking of things changing, for those listening, I just want to point out that we’re recording this on September 4th, around 9:00 AM, and we’re going to launch this episode on September 10th. So, things may change even within the week that we launch it. So, if anything changes, we will be sure to include those in the show notes and in the episode notes that they push to the website. So, keep an eye on those just in case anything additional changes along the way.

Jason: Yeah, that’s a good point.

Eric: So, for those who have applied for a loan, particularly, with First United but with any institution, really a lot of lenders are sending out those forgiveness application processes and links to portals to be able to handle that process. For First United, I know we’re using a company called Abrigo or a system called Abrigo. And so, they’re going to have access to this portal that will have all of this information, all the things that they entered so that they can more simply get through the forgiveness process. One of the questions we’ve received from some of the folks is can that portal be accessed multiple times, or do you need to, as soon as you click it, fill the whole form out and be done with it?

Jason: No, the software that we’ve chosen to partner with has been very responsive. They’ve put together what we think is a really good system. And one of the features is you can go into it multiple times. So, you get started on the application, you realize, I don’t have this piece of information that it’s asking or I need to check with my accountant or financial advisor on something, it can be accessed numerous times. So, it’s not a one and done system. You don’t have to have everything whenever you first sit down, you can go back to it numerous times.

Eric: Good. I think it’s appropriate for a forgiveness program to be very forgiving in the setup of it.

Jason: You would like to think so.

Eric: I would. So, you mentioned accountants helping out in the process, so if my accountant is completing that forgiveness application, or if any of our listeners are having their accountants help them out, do they just forward that link on and then does the borrower need to do anything?

Jason: Yeah. So, whenever you first sign into to the system, the system’s going to require you to set a six-digit pin number for your access. So, first of all, if the company and a representative of the company goes in and initially, and sets up this pin number, of course, for the accountant or financial advisor to then be able to access that system, they’re going to need that six-digit pin number. So, you’d need to provide that to your accountant. Outside of that you know, the accountant can certainly complete all the application and really the only thing the borrower would need to do from there is they would just need to review the document, make sure that they agree with everything the accountant put on the form and then basically sign the document.

Eric: Awesome. Yeah. And it’s a pretty simple process of kind of stepping through the process. It looks pretty easy to do. Speaking of being easy and many of our borrowers are under the impression that if their loan is under a certain amount and that amount that everyone seems to be focusing on is $150,000, if their loan is under $150,000, many are believing that that is automatically forgiven. What’s the current state of that?

Jason: Well, as you mentioned, it is September 4th and it is now 9:14 AM, according to my clock. And at this point in time, there is no automatic forgiveness. So, it doesn’t matter what the amount of the loan is. There is no automatic forgiveness. However, as you mentioned, there has been a lot of discussion around that. And unfortunately, before Congress recessed, they were not able to get something done as far as an automatic forgiveness. The amount of $150,000 was kicked around quite a bit that anything below that was going to be automatically forgiven, but that has not passed at this point. There’s still hope within the business community, as well as the banking industry that there will be an automatic forgiveness. But certainly, at this point, can’t promise that there’s nothing that says it’s going to happen. Just a lot of expectation that possibly it will.

Eric: Gotcha. However, is there an easier approach for folks who have that smaller loan amount?

Jason: Well, there is what they call an EZ Application. And basically, there’s kinda some tests if you’re eligible for that EZ Application. First of all, if you’re a sole proprietor or an independent contractor, you’re eligible for that EZ Application. Others that are eligible for it is if you had no reduction in your FTE count, your full-time equivalent employee count. And if you had no salary reduction during that period you’re eligible for the EZ Application. And you know, we’d recommend that you, you know, take a look at that and also talk to your accountant or financial provider and, you know, get their opinion on it as well as to whether you’re eligible for the EZ Application. But there are a number of individuals that are eligible for that.

Eric: Excellent. Yeah. I know in the system that we’re deploying, it sort of asks you those couple of questions upfront. It kind of dictates whether you have the full form or the EZ form.

Jason: Yep. That’s a very good point. That’s good feature within the software. You definitely want to take a look at that and see if that is a possibility for you, definitely.

Eric: Yeah. So, once folks have filled out the form and submitted the application, is there a timeframe that they should expect to have a decision on the forgiveness?

Jason: There is. There’s actually a couple timelines. So, first of all, whenever you…you actually have an extended period of time to apply for the loan forgiveness. So, just as soon as the covered period’s over, you don’t necessarily have to apply like the day after. You actually have 10 weeks from the end of your covered period for the borrower to submit the forgiveness application. Now, as we said earlier, you know, you can do it between that 8-week and 24-week period if you’ve met the requirements, but once the 24 weeks is up, there’s actually another 10 weeks after that that you have from the covered period to submit your application. Once you submit the application to the bank, the bank has up to 60 days to put that application together and submit it to the SBA for final approval. And then, you know, up to that 60 days, it can go to the SBA, then after the SBA receives it, they have 90 days to either approve forgiveness or request additional documentation, or they could deny the application as well. So, there are some timelines there. Ten weeks to get it submitted to the bank after the covered period, 60 days for the lender to get it reviewed and submitted, then 90 days for the SBA to approve, request additional documentation, or deny the application.

Eric: Okay. So, that’s a long period of time to not have an answer.

Jason: It is.

Eric: So, there’s like seven months or more that a person could theoretically be sitting on the paperwork on their end, or then submitting it and waiting on both the bank and the SBA. Do they need to..will they owe any interest on the loan at that time? Do they make payments? Do they just sit and wait? What’s the status from that point?

Jason: You basically just sit and wait and you don’t have payments due during that period of time. So, the payments will be based upon the final determination from the SBA. So, you know, no payment to make until you know, the application is reviewed and it’s determined whether it’s going to be fully forgiven, partially forgiven, or denied in some fashion. So, nothing to do after you submit that paperwork until you hear back from the SBA and from the bank on that.

Eric: Cool. So, after the customer has, you know, taken the time to look through their documentation they’ve submitted, it goes to the bank, the bank has those couple of months, those 60 days to review things or submit it to SBA, are the banks looking at the applications for any errors? Are they trying to make sure that’s clean before it gets submitted? Or what are they doing during that period of time?

Jason: Yeah. So, while emphasis is really placed on the borrower, or, you know, the borrower’s accountant or financial assistant to get everything correct on the form, the banks are, you know, taking a look at the documentation. They’re trying to make sure that everything’s completed. You know, they’re trying to help the borrower make sure that they get the forgiveness that they’re eligible for. So, they are reviewing those. And that’s why they were given 60 days to really get those submitted you know, so there can be a review process from the bank, have a second look at it. And you know, making sure that there’s as much documentation as the SBA may require to help them get the full forgiveness possible.

Eric: Cool. We’ve also had questions about details regarding who’s eligible for safe harbor. So, can you…A, can you answer that, but also can you kind of describe what safe harbor is?

Jason: Yeah. So, safe harbor came about because there was…whenever PPP applications originally started flowing and they started getting funded, there were a number of businesses that just weren’t able to open. So, you know, you may be eligible for safe harbor if the business was unable to open due to CDC guidelines or maybe state mandates, they weren’t allowing the businesses to open. You know, another example would be if you had a reduction in full-time employees, but it was of no fault of your own or of the business. You know, the business made efforts to bring those employees back but you know, for whatever reason, the employee you know, either refused to come back or they couldn’t find labor to replace them. So, there is some safe harbor there, you know, for the right reasons and with the right documentation.

Eric: Gotcha. So, through this whole process, and we’ve talked about it, we’ve joked about it, I’m even thinking maybe launching this episode early and putting a note at the beginning that we’re not gonna have an episode on Thursday because just to get this out in time. But what will happen if changes are passed on forgiveness? Like, I mean, because things are so fluid, how should borrowers treat, you know, their loan and what should they be worried about?

Jason: I would say the key to that question is flexibility. And I would say if Congress does get together and there’s something passed and there’s changes that come out and, you know, the SBA passes these changes along, banks are going to, first of all, they’re going to have to work with, you know, whatever technology company they’ve chosen to work with as far as software. So, you know, there may be a period of time where we have to stop taking these applications, those forgiveness applications, so we can allow the software companies to make those changes. But, you know, as soon as possible, we’re gonna get these applications flowing again. SBA has been pretty good so far as far as, you know, if a change occurs, and let’s say something that would occur and it would be to an advantage of one of the borrowers that’s already submitted their application. You know, in the past, they’ve been pretty good about, you know, allowing that customer to reapply or, you know, continue on in the process they’re already in just, you know, to whatever’s going to work to their advantage. So, I mean, we’re just going to have to be flexible in a number of different ways. If changes kinda roll out we’ll certainly get those changes out on our website to try to make people aware of them as soon as possible. And then we’ll work with software company as well as the SBA and our borrowers to get those changes implemented best we can.

Eric: Well, I guess that’s the best anyone can ask. Well, Jason, do you have any final thoughts that you want to share with our listeners or that kind of completes the main questions that we’ve been receiving, but do you have any final thoughts you want to talk about the PPP program overall or anything like that?

Jason: Well, I guess, you know, just to kind of recap, you know, we do try to put as much on our website as possible related to the PPP loan process and forgiveness. Our marketing area’s got a lot of good information out there for us to be able to pass along to tell anyone that’s interested. So, you’ll want to check out www.mybank.com and then look for PPP and forgiveness information. We’ll get updates out as things change there. And I guess just as a final thought you know, I think First United much like a lot of other community banks have really embraced the PPP process for borrowers within their market areas. I know First United processed over 1,100 of these loans. Between the 1,100 loans, there was over 17,000 employee jobs preserved through those efforts. And, you know, something that, you know, I’ve been really proud to be a part of. And I know that a lot of others have really you know, put a lot of time and effort into it and have really felt good about the process. So, it’s been good for the community, and happy to be part of it.

Eric: Absolutely. Well, Jason, thanks again. I want to sincerely thank you for joining me today and providing such helpful insights. And as you mentioned, if anyone has questions, wants to learn more, the best way they can check that out is to go to mybank.com. We have pages specifically for PPP and forgiveness. So, mybank.com/ppp and mybank.com/forgiveness will take you to those respective pages and you can also find them in the menu. So, that brings us to the end of our show. You can always find more episodes by visiting mybank.com/podcast or find us on your favorite podcast app. And we are on pretty much every podcast app there is out there. So, it’d really be helpful for us if you subscribed, that way you can get helpful information like this that Jason has given you today. And give us a five-star rating. That’ll help other people find our podcast as well so that they can be assisted with the helpful information we’re providing. You can also leave us feedback, ask questions, or request a topic for us to discuss by sending an email to podcast@mybank.com. Thanks again for listening, we’ll be back next week with more helpful content. But until then, we wish you the best in focusing on what matters most to you.

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Eric: This recording is for informational purposes only. Any references in this recording to any person, organization, product, or service does not constitute or imply the endorsement, recommendation, or affiliation with First United Bank & Trust. First United is not responsible for your use of the information mentioned within this podcast. Please consult legal or tax professionals for counsel as needed.

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