Some Minnesota companies that have obtained PPP loans are forgoing forgiveness – for now


Faced with this possibility in what has already been a difficult business year for many, some borrowers in Minnesota and the United States are now waiting to apply for debt cancellation. They could save even more money if the terms of the program were changed.

It may be up to Congress to make sure that happens.

“Without congressional action, businesses will face an unexpected tax bill when they file their taxes for 2020 as they continue to fight government-imposed shutdowns or slowdowns. Many of these businesses will close and never reopen.” , according to a letter in Congress signed by several hundred business groups. “This insane fiscal policy turns both the letter and the spirit of the PPP upside down.

With US companies taking out $ 525 billion in PPP loans nationwide, it takes some time for the US Small Business Administration, which oversees the program, to process forgiveness requests. Approximately 595,000 applications have been submitted by November 22, the latest date for which program data was available, of which approximately 367,000 have been approved.

State-level forgiveness data is not yet available, so it’s not clear how much of the $ 11.2 billion in P3 loans taken by Minnesota companies has been forgiven.

At Sterling State Bank, which bank vice president Tyler Coleman said has facilitated about 500 P3 loans for borrowers in southeast Minnesota, only about 150 borrowers have requested forgiveness. To date, only 59 have been approved by the SBA, he said.

There are a number of factors at play when it comes to when people apply, ”Coleman said in an interview. ” No. 1, we suggest them to talk to their accountant. And there are a number of different accounting firms that publish a lot of material on how people should treat P3 loans. “

This is mainly because companies whose loans are canceled will not be able to deduct the expenses they used to cover those loans. – like payroll and rent – comes on tax day, according to recent guidelines from the Internal Revenue Service. And because borrowers have up to 10 months from the last day of their loan period to request a forgiveness, choosing to wait could at least avoid a potentially higher tax burden for another year.

Waiting might turn out to be an even better decision if Congress ultimately changed the terms of the PPP to make the expenses covered by program loans deductible. But there is no guarantee that will happen, although it was discussed during negotiations on a second major stimulus package.

For its part, the SBA also advises PPP borrowers to discuss the forgiveness conundrum with their personal accountants or financial advisers.

It’s a very individualized decision,“said Brian McDonald, director of the Minnesota SBA district office, in an interview.

Meanwhile, about one-third of North Shore Bank’s 300 PPP borrowers in northern Minnesota have requested a forgiveness, according to director of loans Brian Murphy. It is not entirely clear that the others are waiting to apply because of tax considerations.

I have yet to hear this directly from our borrowers, ”he said.

The wait could also benefit borrowers who took out both PPP and Economic Disaster Lending (EIDL) loans from the SBA during the pandemic if other aspects of the programs were to change. The EIDL loans were made partly in the form of an advance, the amount for which the SBA will not write off PPP debt, which Coleman said was not initially communicated to borrowers or lenders – and which could be a problem for both of them.

“It’s not the worst thing in the world, but it’s also a burden on the banks now,” he said. “We expected these loans to be completely canceled, and now all of a sudden we have these little loans … on which we’re only making 1%, which is not a very favorable rate.”

Whether Congress will remove the EIDL requirement for PPP borrowers remains an open question.

Contact Matthew Guerry at or 651-321-4314

Leave A Reply

Your email address will not be published.