The US Small Business Administration (SBA) on Wednesday released new guidelines designed to simplify and speed up the forgiveness process for businesses and nonprofits with Paycheck Protection Program (PPP) loans of $ 150,000 or less.
The SBA also announced that it will launch a new app portal on August 4, allowing borrowers to request a rebate directly from the agency instead of having to go through their lender. More than 600 banks have agreed to grant access to the portal to more than 2.17 million borrowers.
In a 29-page Interim Final Rule (IFR), the SBA introduced a COVID revenue reduction score that can be used at the time of remittance to document the revenue reduction required for second-draw PPP loans. The new IFR also establishes a direct borrower forgiveness process for lenders who choose to opt for an alternative method of processing loan forgiveness requests.
In addition, the IFR extends the loan deferment period for PPP loans in cases where the borrower files a timely appeal against a final SBA loan review decision.
The PPP has provided more than 11.7 million forgivable loans totaling nearly $ 800 billion to small businesses and other eligible entities affected by the economic impacts of the COVID-19 pandemic. Almost $ 400 billion has been forgiven.
Loans of $ 150,000 or less represent 93% of outstanding PPP loans, the SBA said.
Despite previous measures to streamline the process of remitting these loans, many small PPP lenders have informed the SBA that they lack the technology and manpower to develop effective electronic loan remission platforms for them. process requests.
Overwhelmed by the volume of PPP loans and aware of the 60-day legal requirement for lenders to issue a forgiveness decision to the SBA upon receipt of the borrower’s loan forgiveness request, many small lenders limit when they will accept borrower rebate requests. This policy leaves borrowers in the dark as to whether they will need to start making payments on their PPP loans while they wait for their lenders to process their forgiveness requests.
Additionally, the SBA said hearing from PPP lenders of all sizes that the requirement for borrowers to submit and lenders to review income reduction documentation at the time of remission delays the remission process for PPP loans. second draw of $ 150,000 or less. .
To address these issues and ease the forgiveness bottleneck, the SBA is making two important changes, described below. Further guidance for the two changes will be available soon, the SBA said.
1. Introduction of a COVID revenue reduction score
To streamline the cancellation of second-draw PPP loans of $ 150,000 or less when the borrower has not submitted income reduction documentation at the time of loan application, the SBA will offer another form of reduction confirmation. of income.
Every second PPP loan of $ 150,000 or less will be assigned a COVID Revenue Reduction Score created by an independent third-party SBA contractor, based on a variety of inputs including industry, geography and size of the company, and current economic data on economic recovery and the return of companies to operational status.
The score will be kept in the SBA loan cancellation platform and will be visible to lenders to use as an alternative to document the reduction in income. Additionally, the score will be visible to borrowers who submit their loan forgiveness requests through the platform using the borrower’s direct discount process described in the next section.
When the score meets or exceeds the value required for validation of the borrower’s income reduction, using the score will satisfy the borrower’s requirement to document the income reduction. When the score does not reach the value required for validation of the borrower’s income reduction, and if the borrower has not already provided documentation to the lender that validates the borrower’s income reduction, l The borrower must provide the documentation either directly to the lender (for those lenders who do not opt for the borrower’s direct remission process) or provide the documents to the lender by uploading them to the platform.
2. Launch of a direct borrower forgiveness process
The SBA is launching a new direct remission process that provides PPP lenders with an optional technology solution that will essentially allow their borrowers to request a loan remission directly from the SBA through the new portal that will launch on August 4.
When a PPP lender opts for the direct borrower remittance process, the new portal will provide a single, secure location that integrates with the SBA’s PPP platform and will enable borrowers with loans of $ 150,000. or less to request a loan forgiveness using an electronic equivalent of SBA Form 3508S. Upon receipt of a notice that a borrower has requested a forgiveness through the platform, lenders will review the loan forgiveness request and render a forgiveness decision to the SBA inside the platform.
The SBA said the new forgiveness process will provide lenders with lower costs, increased efficiency and faster remittance of SBA forgiveness payments, while borrowers will benefit from the ability to submit loan forgiveness requests directly. through the platform and will reduce the waiting time and uncertainty associated with submitting through their lender.
After initiating the borrower direct remission process, borrowers should continue to submit loan remission requests to their lenders, rather than through the platform, under the following circumstances:
- The PPP lender does not choose to use the borrower’s direct discount process;
- The borrower’s PPP loan amount is over $ 150,000;
- The borrower does not agree with the data provided by the SBA registration system or cannot validate their identity on the platform (for example, in the event of an unreported change of owner); Where
- For any other reason where the platform rejects the borrower’s submission.
Extension of adjournment for OHA appeals
The current rule for appeals of SBA final loan review decisions on PPP loans provided that, because a PPP borrower must start paying principal and interest on their remaining PPP loan balance when the SBA remits the amount of loan forgiveness to the PPP lender (or informs 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 appeal 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 The SBA’s Office of Hearings and Appeals makes a final decision on the appeal. The revised OHA rule will provide that the borrower must notify the lender of the appeal so that the lender can extend the deferment period. Under the revised OHA rule, an appeal must be filed with the OHA within 30 calendar days of the appellant’s receipt of the SBA’s final loan review decision.
The SBA’s new direct lending process and portal has been discussed at length in two recent AICPA Town Hall webcasts, which address other P3 remittance issues and calculations. Replays of the webcast are available free of charge at AICPA television.
AICPA experts discuss the latest news on PPP and other small business support programs at a virtual town hall that is held every two weeks. The webcasts, which offer CPE credits, are free for AICPA members and $ 39 for non-members. Go to AICPA Town Hall Series web page for more information and to register. Recordings of Town Hall events can be viewed free of charge at AICPA television.
The AICPA Paycheck Protection Program Resource Page houses resources and tools produced by the AICPA to help cope with the economic impact of the coronavirus.
For more information and stories on the coronavirus and how CPAs can handle the challenges of the outbreak, visit JofA‘s coronavirus resource page Where subscribe to our email alerts for the latest PPP news.
– Jeff drew ([email protected]) is a JofA senior editor.