Despite efforts by the U.S. Small Business Administration (SBA) and U.S. Treasury to streamline Paycheck Protection Program (PPP) loan forgiveness forms and processes, lenders continue to have concerns. To help lenders and borrowers, the SBA launched a PPP loan forgiveness portal today, August 4, 2021. The new portal will allow some borrowers with loans up to $150,000 to apply for forgiveness directly with the SBA instead of going through their lender.
Many borrowers and lenders who participated in the PPP reported being overwhelmed by the complexity of the loan forgiveness process. While the SBA and U.S. Treasury made changes in October 2020 for borrowers with loans of $50,000 or less, additional efforts were necessary to help streamline loans in the $150,000 or less category since 93% of outstanding PPP loans fall into that range.
The Economic Aid Act provided for a simplified loan forgiveness application process for borrowers with loans of $150,000 or less in 2020 (SBA Form 3508S). The new forgiveness application was less burdensome for borrowers; however, lenders were inundated with the number of new loan forgiveness applications. Borrowers were displeased with the amount of time it was taking lenders to process the applications and were worried they would have to start repaying the loan while waiting for a forgiveness decision from the SBA.
Simplifying the PPP Loan Forgiveness Process
Since the inception of the loan forgiveness process, the SBA has received numerous comments from borrowers and lenders that the forgiveness process was complicated. Changes were issued throughout 2020 to simplify the process, but lenders still needed to limit the number of forgiveness applications they accepted due to the requirements set by the SBA.
In response to these and other concerns the SBA, in July 2021, issued an interim final rule (IFR) to further streamline the forgiveness process. In the IFR, the SBA made two changes to further simplify and streamline the forgiveness process for loans $150,000 or less.
- For Second Draw PPP Loans of $150,000 or less, where the borrower is required to provide revenue reduction documentation at the time of loan forgiveness, SBA is allowing lenders to use a COVID Revenue Reduction Score developed by an independent, third-party SBA contractor as an optional method to document the borrower’s revenue reduction.
- The SBA is making available a direct borrower forgiveness process for lenders that choose to opt-in as an alternative method for processing borrower loan forgiveness applications for all PPP loans of $150,000 or less.
COVID Revenue Reduction Score
To help streamline cases where the borrower did not submit documentation of revenue reduction at the time of the Second Draw PPP loan, the SBA is offering an alternative form of revenue reduction confirmation for loans of $150,000 or less.
Prior to this IFR, borrowers would need to provide tax forms, bank statements, financial statements or other documents supporting that they met the revenue reduction standards, and those documents would need to be reviewed by the lender.
The alternative confirmation is based upon an independent third-party SBA contractor developed COVID Revenue Reduction Score (score) which factors in a variety of inputs including industry, geography, and business size. The score uses current data on economic recovery and return of businesses to operational status. Each Second Draw PPP Loan of $150,000 or less will be assigned a score, which will be maintained in the platform and will be visible to lenders to use on an optional basis as an alternative to document revenue reduction. Additionally, the score will be visible to those borrowers that submit their loan forgiveness applications through the platform using the direct borrower forgiveness process.
When the score meets or exceeds the value required for validation of the borrower’s revenue reduction, use of the score will satisfy the requirement for the borrower to document revenue reduction. When the score does not meet the value required for validation of the borrower’s revenue reduction, and if the borrower has not already provided documentation to the lender that validates the borrower’s revenue reduction, the borrower must provide documentation either directly to the lender (for those lenders that do not opt-in to the direct borrower forgiveness process) or provide documentation to the lender by uploading it to the platform.
Direct Borrower Forgiveness Process
The direct borrower forgiveness process is an optional technology solution that the SBA is providing to PPP lenders. This is designed to leverage the SBA’s existing platform to align and integrate the streamlined forgiveness application for loans of $150,000 or less as mandated by the Economic Aid Act.
As of July 29th, over 600 banks have opted into direct forgiveness which enables over 2.17 million borrowers to apply through the portal.
The platform provides PPP lenders who opt-in with a single secure location for all its borrowers with loans of $150,000 or less to apply for PPP loan forgiveness through the platform using the electronic equivalent of SBA Form 3508S. Upon receipt of notice that a borrower has applied for forgiveness through the platform, lenders will review the loan forgiveness application in the platform and issue a forgiveness decision to SBA inside the platform.
Benefits for borrowers using the platform include the ability to submit loan forgiveness applications directly, reduction in wait time and certainty as to application submittal to the SBA.
To visit the SBA PPP direct forgiveness portal, click here.
As always, we are available to discuss your situation or assist you with preparing your documentation needed for loan forgiveness. If you would like to speak with one of our CPAs, please contact us at your earliest convenience.
To read the entire Interim Final Rule published by the SBA, please click here.
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