SBA PPP LOAN FORGIVENESS RULES
By Carroll D. Hurst, CPA | Director
These are unprecedented times in our economy. Many difficult decisions are being contemplated by our government and those include ensuring our businesses have ample financial resources. One such tool that may help our business clients with liquidity are Small Business Administration (SBA) Disaster Relief Loans, which have been made available to businesses that experience substantial economic loss due to the impact of coronavirus. The Economic Injury Disaster Loan option is available only after the small business is unable to obtain credit elsewhere.
Qualifying for the SBA Disaster Relief Loan in Virginia
In order to qualify for SBA disaster loan relief, the Governor of each state must provide the SBA with an authorization that the state qualifies as a disaster area that has been adversely affected by coronavirus. On March 18, 2020, Governor Northam sent a disaster declaration for numerous cities and counties in the Commonwealth. This list is expected to grow as the coronavirus pandemic continues.
In the case of the coronavirus, the loans will not be used to fund uninsured property damage as was the case with other disasters such as Katrina, but instead will be used to fund losses and working capital needs incurred as a result of the coronavirus. We believe that SBA Form 1368 will be a key form that will be used to support the extent of financing requested from SBA, as it requires information on gross sales for each month during the previous three years. We recommend that companies use this information together with projected income statements and cash flow statements for 2020 to support their loan requests and show the decline in profitability from prior years and the level of losses estimated for 2020.
Our Transaction Advisory team at Keiter Advisors has provided more details about the key features of the loans and the process for applying in their article, Small Business Administration Disaster Loans Due to Coronavirus’ Impact.
We will keep you updated on new financial tools to help your business manage these extremely challenging times. If you would like to talk with us about your specific business concerns, please contact us. We are here to listen and help.
Disclaimer: This content has been prepared for general guidance and informational purposes only based on the date published.
The FFCRA, CARES Act, and SBA Paycheck Protection Program (PPP) are continually releasing new guidance that may change the information provided within this content. Keiter recommends that you perform your own independent research and/or speak with a qualified accounting professional before making any financial business decisions. © 2021 Keiter, All Rights Reserved.
Additional COVID-19 Resources:
- Navigating a Coronovirus Economy: What Business Owners and Businesses Need to Know
- IRS Defers Income Tax Payments in Response to COVID-19
- Families First Coronavirus Response Act – Employer Tax Credits
- Federal and Virginia Tax Updates in Response to Coronavirus
- Not-for-Profit Disaster Loans Available in Response to COVID-19
About the Author
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.