The CFO'S Perspective

Obviously, you cannot simply make business debt disappear. (Wouldn’t that be nice?!) But what you can do is make it more manageable, so it is easier to pay off.

Debt restructuring and debt consolidation are two debt management strategies that companies can use when they need help getting out from under their debt. There is a lot of confusion around these two financial debt management tools, which is why we have decided to put together a quick resource to help business owners and CEOs understand their options.

In the case of a Small Business Administration Payroll Protection Program (“PPP”) loan, businesses have been presented with an opportunity to maintain their current employment levels and pay certain expenses with assistance from Uncle Sam, in the form of a loan. These loans carry a low-interest rate and up to five-year maturity.

Businesses can apply to have the loan treated as a grant; in which case the loan is forgiven.

This seems like an easy decision for the Chief Financial Officer. Ask for loan forgiveness and accept the gift. But would it ever make sense not to ask for forgiveness? Could the underlying economics of a long-term loan be almost as good as or even better than an immediate grant? The short answer is yes, but only under very specific circumstances. For most businesses, under most circumstances, and for most loan types, loan forgiveness is best.