The Small Business Administration (SBA) has released new guidance intended to expedite the forgiveness process for certain borrowers under the Paycheck Protection Program (PPP).

Overview on Forgiveness

PPP loans are generally forgivable if the borrower uses the proceeds for eligible costs, including at least 60% on eligible payroll costs. The borrower can apply for forgiveness any time before their loan’s maturity date arrives. Most loans made prior to June 5, 2020 have a maturity of two years. Those made after June 5, 2020 have a maturity of five years.

A borrower has until 10 months after the last day of the covered period (between 8 and 24 weeks from the date the loan was received) to apply for loan forgiveness before the payment deferral period ends. These loans will convert to standard loans with a 1% interest rate due before the maturity date, unless the loan is subsequently forgiven.

PPP Loans $150,000 or less

Launch of a direct borrower forgiveness process:

The SBA is launching a new direct forgiveness process that provides PPP lenders with an optional technology solution that essentially will allow their borrowers with loans of $150,000 or less to apply for loan forgiveness directly to the SBA through the new portal that will launch Aug. 4.

Participating lenders will receive notice when a borrower applies through the SBA platform and will review applications and issue forgiveness decisions inside the platform. The SBA hopes this will reduce the wait time and uncertainly associated with applying through lenders.

Introduction of a COVID Revenue Reduction Score

To streamline forgiveness of second-draw PPP Loans of $150,000 or less where the borrower did not submit documentation of revenue reduction at the time of the loan application, the SBA will offer an alternative form of revenue reduction confirmation. To qualify for such loans, a borrower must have experienced a revenue reduction of at least 25% during one quarter of 2020 compared with the same quarter in 2019. If a borrower didn’t produce the necessary documentation when applying for the loan, it must do so on or before the date of application for forgiveness.

  • The score will be maintained in the SBA’s loan forgiveness platform and will be visible to lenders to use 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 described in the next section.
  • 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.

See more details on both items at this recent JofA article: https://www.journalofaccountancy.com/news/2021/jul/sba-streamlines-forgiveness-process-most-ppp-loans.html

PPP Loans > $2M: SBA officially drops PPP Loan Necessity Questionnaire requirement

  • The SBA has informed lenders that it is eliminating the loan necessity review for Paycheck Protection Program (PPP) loans of $2 million or greater.
  • The SBA said it would no longer request either version of the Loan Necessity Questionnaire: SBA Form 3509 for for-profit borrowers and SBA Form 3510 for not-for-profit borrowers. In addition, Loan Necessity Questionnaires previously requested by the SBA are no longer required to be submitted.

See more details at this recent JofA article: https://www.journalofaccountancy.com/news/2021/jul/sba-drops-ppp-loan-necessity-questionnaire-requirement.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=13Jul2021

Deferment extension for SBA’s Office of Hearings and Appeals (OHA) Appeals

  • The current rule for appeals of final SBA loan review decisions on PPP loans provided that because a PPP borrower must begin making payments of principal and interest on the remaining balance of its PPP loan when the SBA remits the loan forgiveness amount to the PPP lender (or notifies the lender that no loan forgiveness is allowed), an appeal by a PPP borrower of any final SBA loan review decision does not extend the deferment period of the PPP loan.
  • The IFR amends the appeals rule to provide that a borrower’s timely appeal of a final SBA loan review decision will extend the deferment period for the PPP loan until the SBA’s OHA issues a final decision on the appeal.
  • The revised OHA rule will provide that the borrower should notify the lender of the appeal so that the lender can extend the deferment period.
  • Under the revised OHA rule, an appeal petition must be filed with OHA within 30 calendar days after the appellant’s receipt of the final SBA loan review decision.

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