Page 30 - BusinessWest February 3, 2021
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ting funds to those who needed them, much of the clarification about the use of the funds, tax- ability of the funds, and criteria for forgiveness were ironed out after the funding was in hand and being spent by the recipients. What ensued was months of additions to the SBA’s frequently- asked-questions (FAQ) document clarifying the eligible uses of the funding to ensure forgiveness and further attempts by Congress and the SBA to adjust program requirements as the pandemic continued.
More than 50 FAQs were issued to clarify the PPP requirements, and 20 relating to the EIDL loans.
In the frenzy to obtain the funding for the PPP and EIDL loans, it became clear that not everyone read the fine print, or that the fine print changed as clarity was provided for these programs. The fine print provided recipients with additional requirements for the funding they may have been unaware of at the time of application or even dur- ing the spend-down period.
As trained professionals, accountants and business advisors spent months learning the requirements and pivoting as they changed. It would be unreasonable to assume that those who received the funding could keep up with the fast- paced changes that were occurring, including the fine print. For accountants, there have been times we could barely keep up with the changes.
The result is that those receiving the funding need to be aware of those items in the fine print for the PPP funding and the EIDL loans that may impact them.
EIDL
Recipients of the EIDL loans, which could be
up to $2 million in amount, were required to sign loan paperwork, outlining the terms of the fund- ing. In the fine print of these loan documents are provisions that the borrower should look out for and be aware of. Some of the provisions are:
• For loans under $25,000, collateral is not required. For loans of more than $25,000, the SBA is provided collateral through business assets, current and future. Transfers or sales of collateral, except inventory, require prior SBA approval. In
expense of the borrower;
• Borrowers have a duty to provide hazard
insurance on collateral and may be asked to pro- vide proof;
• Within 90 days of the borrower’s year end, financial statements, in the format specified by the SBA, are required to be furnished by the borrower;
• The SBA may require a review-level financial statement for a borrower upon written request by
 “With the second round of PPP funding recently released and requirements more recently clarified, reading the fine print should hopefully not be such a daunting or surprising task.
    addition, prior approval is required by the SBA in the event these business assets will be used to secure other financing;
• Borrowers are required to keep itemized receipts, paid invoices, contracts, and all relat- ed paperwork for three years from the date of disbursement;
• Borrowers are encouraged to the extent feasi- ble to purchase only American-made equipment and products with the proceeds of this loan;
• Borrowers must keep all accounting records five years before the loan and three years after in a manner satisfactory to the SBA;
• Borrowers must agree to audits and inspec- tion of assets, if requested by the SBA, at the
”
the SBA at the borrower’s expense;
• Prior approval from the SBA is required
for distributions of the borrower’s assets to the owners or employees, including loans, gifts, or bonuses;
• Borrowers must submit, within 180 days of receiving a loan, an SBA certificate or resolution. For most borrowers, the SBA has followed up or is following up on this requirement now;
• Default under the provisions may result if a borrower merges, consolidates, reorganizes, or changes ownership without prior SBA approval; and
• The loans can Fine Print
be prepaid, without Continued on page 42
      Richard F. Burkhart, CPA and Salvatore J. Pizzanelli, CPA, JD, PFS
The talented team at Burkhart Pizzanelli
Accounting
Julie M. Quink, CPA and Deborah J. Penzias, CPA
The talented team at Burkhart Pizzanelli provides
provides expertise in a full range of accounting
and financial services. Feel free to call on us at Consulting 413.734.9040.Feel free to call on us at 413.734.9040.
expertise in a full range of accounting and financial services.
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201 Park Avenue, Suite 2 • West SpringfieldR, eMtAir0e1m08e9nt Plans T: 413.734.9040 • F: 413.781.5609
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