PPP Loan Repayment: Good Things Come to Those Who Wait?
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Nov 30, 2020

PPP Loan Repayment: Good Things Come to Those Who Wait?

If your small business took out a Paycheck Protection Program loan to make it through the coronavirus pandemic, chances are the thought of loan forgiveness or paying back the funds is causing you a lot of stress. However, our guest, Glenn Sandler, CEO of G.I. Tax Service, believes businesses shouldn’t be in a hurry to request loan forgiveness. In fact, they could experience major benefits from taking their time in doing so.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

If you're a business that took out a Paycheck Protection Program loan to help make it through the coronavirus pandemic, a healthy part of your private time might be taken up by how you are going to pay back those funds or receive forgiveness on them. However, according to our guest today, such businesses shouldn't be in a hurry to request loan forgiveness and could experience major benefits if they take their time in doing so. Glenn Sandler is CEO of G.I. Tax Service, and today he will talk to us about the benefits of waiting to fill out a PPP forgiveness application and legislation that is out there to address small business concerns related to the PPP.

A line from a blog you've worked on for PICPA, CPA Now, states, "The uncertainty surrounding PPP loans is maddening for business owners." Can you tell us a little bit about why it's so maddening?

[Sandler] It's the uncertainty of what the future is. You have to understand, when people got these PPP loans, these are businesses that were suffering. Most businesses were suffering. There were some that got PPP loans, and they didn't really need them, but they were using them to expand their business. But, if you take the restaurant business, the gyms, health clubs, hair salons, normal small-business people, they borrowed money and they don't have the money to pay it back.

They took all this money from these companies because they were suffering, and now they're talking about, is it going to be forgiven or not? If it's not forgiven, then all you've done is put them in a worse place.

What they're doing is sitting back saying, “What am I going to do now, because if I have to pay this money, I might have to close my business.” They're waiting for the government to come out and keep their word, basically. Because, when they came out with the PPP money way back in April, they made all these promises that you weren't going to have to pay it back if you kept within these guidelines, and the government, they haven't come to terms yet.

Everybody's freaking out a little bit. Now it's becoming the end of the year, and it's getting close to Christmas time. These things were supposed to be forgiven by now, and then they hear all kinds of things on the radio and on TV that it might not be forgiven, and they're just becoming normal, small-business people with the worries that we have being in the small-business world.

You talk about a couple pieces of legislation that are out there related to the Paycheck Protection Program. First up, we can talk about the Paycheck Protection Small Business Forgiveness Act by Sen. Kevin Cramer of North Dakota. What does that plan entail?

[Sandler] He's an interesting cat. He is a small-business-minded person. What he said was anybody that borrowed less than $150,000, then we don't need to do a 21-page application for forgiveness. I looked at the original application for forgiveness, and it was harder than the CPA Exam. There's no way that the normal small-business guy, the air conditioner guy, can do it. The lawn guy can't do it. The hair salon lady, she can't fill out a 21-page application for forgiveness.

What Cramer wanted to do is simplify the process. It's basically a five-question questionnaire, an attestation that you're within the guidelines of the program, and if you have borrowed less than $150, 000, which is the majority of people, then we're going to forgive the $150,000 bucks.

What it does, in that point too, it also holds harmless the banks that lent the money. So then, the banks don't care really about going after somebody, because if you attested, you said you did everything right, then the banks aren't going to be on the hook either, God forbid somebody didn't do something right. It helps everybody streamline the process, and, if it works, then everybody can go off to their Christmas dinners and not worry about having to pay this PPP stuff back. It's basically, you can get this for $150,000 bucks or under.

Then there's the continued Small Business Recovery and Paycheck Protection Program Act by Sen. Marco Rubio of Florida and Sen. Susan Collins of Maine. What are the details on that one?

[Sandler] This is where Rubio and Collins, what they've done is they said that now that we've lent these people all this money, now they need more money.

They don't have enough, because they got enough to pull them through where they're at, but a lot of people need another shot of cash. What they did is they said, “Listen, we're not going to give it to everybody like the first time. You're going to have to basically attest that your sales are down a minimum of 35% from the same period last year.” And, if that's the case, then I think they have a bunch of billions, $250 billion or something that, to lend to small businesses as a second shot in the arm as long as your business is suffering.

I don't know if everybody's aware or not. There's a lot of businesses that have done better than they've ever done in the history of their business in the last six months. Car dealers. I have a mortgage broker that has the best month he'd ever had in 30 years two months ago. There's a lot of businesses that have not suffered as much. They took the original PPP money, they used it to grow, and they hired people and they did exactly what it was intended for.

But then there's the businesses that are still suffering, and there's still a lot of restaurants that are closed. Hair salons, gyms. I have a few clients that have gyms, and they need a second shot of cash. Otherwise, they're going to go down.

What would you say at this point is the status of these pieces of legislation? Are they still being held up?

[Sandler] You know, if there wasn't an election, God knows what would happen. It's really hard to know anything that's going to happen before that Tuesday. Our government has forgotten about the people. They have forgotten about what's important. And the small business guy that's having a hard time, he's nervous. He's worried. He doesn't know if he's going to be able to feed his family or not. These legislators, they say, “Oh, we're going to close everything down, and we're going to quarantine everybody.”

Well, everybody that says they're going to do that are people that have jobs. If you take these reporters and you tell them, “Listen, how about if you don't get paid for the next six months,” we'll see how fast they are saying, “Okay, let's close everything down.”

So, it's the government that are guaranteed paychecks. It's the media people that are all guaranteed paychecks and have forgotten about what runs this country. What really runs this country is the small-business person.

They assume a lot of the risk. They hire most of the people, and these companies do need a shot in the arm. It should have happened a month and a half ago, two months ago. Now nothing's going to happen until this election's over.

I think pretty much that answers the next question I had: What are the factors that have stood in the way of these pieces getting passed? Is it pretty much some of the gridlock that we've seen?

[Sandler] It's all gridlock. It is. Again, I don't want to get into partisan politics, but there are small-business-minded congressmen and senators, and then there are senators and congressmen that are not. What they have to stop worrying about, and what they need to figure out, is what they're going to do to help the people.

Because that's all that really matters. And this gridlock, they go home and they go to their kids' Little League games, and they don't have a problem. But not everybody else gets to do that, and it's unfortunate. I have so many clients that are worried. I just kind of hold their hand through this whole thing, and hopefully they'll get another shot of cash. Then, once this election is over, hopefully everything will open up and everybody will start going back to work again.

For businesses that need to fill out a PPP forgiveness application, what would be the benefits of not being in a hurry to do so right now?

[Sandler] I don't like my clients giving out any information until they're asked. It's the same thing with dealing with the Internal Revenue Service. You don't answer a question until it's asked. I don't want any information being given out that gives the opportunity for anybody to come and question anything that has gone on, until they have to. Right now, there still is no application.

What's out there right now are still these pseudo-applications that might be coming to fruition, but they haven't been approved yet. So anybody that says that there's applications that are being filled out right now, it's only the banks trying to get ahead of the horse, or put that horse at the head of the cart, to ease their pain a little bit. It's nobody's business until the government really wants to know.

In your mind, is the idea that the PPP loans will all be forgiven somewhat inevitable, or will businesses eventually be expected to pay them back? How do you think this turns out?

[Sandler] I think they're going to have to forgive them. These companies don't have the money to pay them back. They lend money to broke companies. They can't afford to pay them back. They can set up all the audit procedures they want to, to come to audit if they filled out the obligations right, or they lied on a tax return, or whatever, to get PPP money. All they did was what they have to do to get their money, and the government can audit everybody they want to, but these people are not going to have the money to pay it back. It basically was a bridge gap to get them to where they are now.

Hopefully, most people are whole right now, or not that far backward. But none of them have the money to pay it back. The government doesn't want to become a collection agency and start to create those problems. You have to understand also, these are not personally guaranteed. They are loaned to the businesses. So, if they're loaned to an LLC, all they can do is fold that LLC and open up another one, because you're not personally guaranteed.

1 comment

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  • David Deininger | Dec 01, 2020
    My biggest concern about applying for forgiveness now vs. waiting is IRS 2020-32.  Will Congress overturn this ruling to the original intent in the law?  That’s what we’re waiting to see.

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    Podcast transcripts are provided as a summary of the conversation and have been lightly edited for the written medium. The transcript is not a verbatim representation of the interview.
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