Just when we all thought that the changes to the Paycheck Protection Program (PPP) were long past us, the Small Business Administration (SBA) announced significant changes to how loan forgiveness for loans of $150,000 or less will be handled. On Wednesday, July 28, 2021, the SBA announced three new changes that will impact those with loans of $150,000 or less. In summary, those changes are:
- Launch of a direct borrower forgiveness process
- Introduction of a COVID-19 revenue reduction score
- Deferment extension of loan forgiveness appeals
These new changes in the loan forgiveness process is in response to the numerous concerns raised by PPP lenders concerned with meeting the statutory 60-day requirement for lenders to issue a forgiveness decision to the SBA from receipt of the borrower’s loan forgiveness. It has been reported that many smaller lenders are limiting when they will accept forgiveness applications from borrowers due to the overwhelming amount of documentation, lack of staffing to timely review applications and lack of technology to assist borrowers in submission of documentation and for lenders staff to review. This has left many borrowers uncertain if they will have to start making payments on their PPP loans while they are waiting for their lenders to process their forgiveness applications.
In addition, the SBA said it has heard concerns from PPP lenders that the requirement for borrowers to submit and lenders to review revenue reduction documentation at the time of forgiveness is delaying the forgiveness process for second-draw PPP loans of $150,000 or less.
Over 90% of all PPP loans are $150,000 or less. Of the nearly $800 billion in issued loans, approximately 50% of those funds have been forgiven to date.
Launch of a Direct Borrower Forgiveness Process
The most significant change, as outlined in the Interim Final Rule (IFR) released by the SBA, is the launch of the SBA Direct Borrower Forgiveness Portal. Currently the new portal is still in a pilot phase but is projected to be launched on Wednesday August 4th. To view the pilot of the new portal, please click here. The portal has been designed to reflect the exact information, in an electronic format, that would be presented and completed from the forgiveness form 3508S. 3508S is the form used for loan forgiveness for loans $150,000 or less. Upon receipt of notice that a borrower has applied for forgiveness through the platform, lenders will review the loan forgiveness application and issue a forgiveness decision to the SBA inside the platform.
PPP lenders that want to participate in this program must opt in to the direct forgiveness program with the SBA. Currently, over 600 lenders have opted into the program. To see a list of lenders currently who have opted into the program and whether your lender is one, click here.
Borrowers should continue to submit loan forgiveness documentation and applications as previous outlined under the following circumstances:
- The PPP lender does not opt in to use the direct borrower forgiveness process;
- The borrower’s PPP loan amount is greater than $150,000;
- The borrower does not agree with the data as provided by the SBA system of record, or cannot validate their identity in the platform (for example, if there is an unreported change of ownership); or
- For any other reason where the platform rejects the borrower’s submission.
Introduction of a COVID-19 Revenue Reduction Score
The SBA has hired a third party consultant to design a Revenue Reduction Score based on a variety of inputs from industry, geography, business size and current economic data regarding economic recovery and return to business and operations status. Each second-draw PPP loan of $150,000 or less will be assigned this Revenue Reduction Score and will be used in place of information where the borrower did not submit documentation of revenue reduction at the time of the loan application. The score will be maintained in the SBA’s loan forgiveness portal 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 above.
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 portal.
Deferment Extension of Loan Forgiveness Appeals
The SBA also issued revisions to the process of appeals of loan review decisions. Currently, when a borrower has an unforgiven balance of a loan and they appeal this final SBA loan review decisions, the borrower must begin making payments of principal and interest on the remaining balance of its PPP loan. 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 guidance issued on Wednesday 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 Office of Hearings and Appeals (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.
As always, we are here to help. Visit our PPP Loan Forgiveness webpage and submit a request for help or support. We have assisted many businesses nationwide and aided in loan forgiveness of over $10 million dollars to date. We are here to assist you and navigate the PPP changes as they come.