The Small Business Administration will allow borrowers with Paycheck Protection Program loans of $150,000 or less to apply online for forgiveness directly from the agency.
Lenders will have to opt in to allow the SBA to process the applications, and they will still issue a decision on whether to grant forgiveness, according to
The initiative, which the SBA touted as a way to start closing down a program that launched in April 2020, was welcomed by banks that are still dealing with the cost of processing applications from borrowers who want forgiveness. Through May, banks had funneled nearly $800 billion in forgivable PPP loans to small businesses hurt by the COVID-19 pandemic.
“As the Paycheck Protection Program concludes, the creation of a new PPP forgiveness platform from the SBA will allow more small businesses to focus their time and resources on successfully reopening, while also providing lenders the choice to retain oversight of their customer relationships,” Consumer Bankers Association CEO Richard Hunt said in a statement Wednesday.
The SBA said in its rulemaking documents that since last summer, it has received comments from borrowers and lenders stating that “the loan forgiveness process is overwhelming and difficult to manage.”
“Despite the implementation of the streamlined loan forgiveness application for borrowers with loans of $150,000 or less, many smaller PPP lenders continue to express concerns to SBA that they do not have the technology or human resources to develop efficient electronic loan forgiveness platforms to process the new streamlined loan forgiveness application,” the agency stated.
Of the more than $521.1 billion of PPP loans issued last year, loans totaling around $279 billion have been forgiven, according to SBA data. Another $81.5 billion in loans are currently under review. Forgiveness applications have not been received for nearly $160 billion in program loans.
Loans of $150,000 or less account for about 93% of the outstanding PPP debt, according to the SBA document.
“The vast majority of businesses waiting for forgiveness have loans under $150,000,” agency head Isabel Casillas Guzman said in a press release. “These entrepreneurs are busy running their businesses and are challenged by an overly complicated forgiveness process. We need to deliver forgiveness more efficiently so they can get back to enlivening our Main Streets, sustaining our neighborhoods and fueling our nation’s economy.”
Lenders have been limiting when they will accept forgiveness applications because of a 60-day window the lenders have to give the SBA a decision, according to the rulemaking documents. Banks have had a
This time lag has created “uncertainty among borrowers that they are going to have to start making payments on their PPP loans while they are waiting for their lenders to accept and process their loan forgiveness applications,” the agency said in the document.
The new online portal is designed to ease the volume of loans that banks are handling.
Banks have seen the costs associated with loan forgiveness eat into the estimated $21 billion they’ve collected from the PPP, according to an
The SBA also said Wednesday that it has hired an outside contractor to develop revenue reduction scores that will assist in evaluating whether borrowers experienced a 25% fall in income, which is required to qualify for a second PPP draw.
If the score, which will be based on industry, geography, business size and other data like foot traffic and credit card spending, does not meet a certain threshold, the borrower will have to submit documentation proving the reduction in revenue that’s required for the second draw.
