The Impact of PPP Loans, One Year Later

By Kurt Ruttum

When the federal Paycheck Protection Program (PPP) was announced in March 2020, we worked with many of our business clients to secure a PPP loan in the first, fastest, and most competitive round of lending by the Small Business Association (SBA). Even as critical questions loomed about forgiveness, tax implications, and timelines, we were optimistic that the program would serve as a vital lifeline. A massive federal aid package designed and rolled out over the course of only a few days, the impact and shortcomings of the PPP will be debated for years to come. What can’t be denied is that the $7 billion distributed in PPP loans to 66,000 Oregon organizations helped keep our state’s economy, fueled largely by smaller businesses, afloat. 

After our clients used their funds within the prescribed timeline and for the appropriate expenses, we turned our attention to forgiveness. Under a constant yet erratic stream of updated guidance from the SBA, we worked with our clients to complete forgiveness applications with their banks. For loans of more than $2 million, we have helped them complete an expected audit. Functionally, the process is a desk audit with a detailed questionnaire that takes some foresight to accurately demonstrate that the loan was used as intended. The wording of the audit letter caused a fair amount of angst for our clients, since on the surface it appeared that the SBA moved the goalposts with regard to proving the original need for the loan. Remember that businesses had to apply for loans with no knowledge of what would happen next with the scale of the pandemic, the shut-down, or with loan forgiveness. The unclear audit letter language was not well received by our clients. From the outset, we emphasized to our clients that early and abundant record keeping on anything PPP-related would be a prudent investment of time, and this has helped in the process of detailing the conditions in which a company took the loan, and how the year turned out.

Unfortunately, we are now in a waiting game. The SBA has stalled in its review of forgiveness applications. The SBA is well-beyond the 30-60 day time frame given for loan review, even for those that don’t require an audit and have been recommended for full forgiveness by the banks. We don’t really know when we will get answers or forgiveness, and that is frustrating for us and our clients.

While one may certainly have a few bones to pick with the SBA’s processes, we’re thankful that the PPP coalesced as a solution that saved countless Oregon businesses. It was also great news to see that a big uncertainty for many of our clients got resolved when Congress came out at the end of 2020 and clarified that borrowers would indeed get a deduction for expenses covered by their PPP loan. This helped our clients and so many other businesses get through, and close the books on, a wild year of uncertainty and challenges that we all hope will be the last of its kind.

Questions about your PPP loan? Contact your primary Tonkon attorney.

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