The PPP forgiveness process for smaller loans has run into several delays. The SBA has taken steps to rectify that.
- The SBA issued an Interim Final Review related to PPP loans of $150,000 and less.
- A COVID revenue reduction score was created to simplify adherence to the 25% revenue reduction requirement for second-draw PPP loans.
- The SBA created a Direct Forgiveness Portal to increase efficiency of the loan forgiveness process.
- The SBA created a PPP customer service team to answer questions and assist borrowers with forgiveness applications,
Need assistance with forgiveness of your PPP loan of $150,000 or less?
The U.S. Small Business Administration (SBA) issued an Interim Final Review (IFR) to streamline the forgiveness process for borrowers with Paycheck Protection Program (PPP) loans of $150,000 or less and update the appeal process. The IFR addresses:
- COVID revenue reduction score
- Direct borrower forgiveness process
- Deferral extension for borrowers in the appeal process
The intent of the first two items is to streamline the forgiveness process for these loans. The SBA estimates that there are still over 7.2 million outstanding PPP loans of $150,000 or less. Many smaller PPP lenders have told the SBA they don’t have the technology or resources to develop efficient platforms to process these loans. The SBA is also hearing that the requirement to verify the revenue reduction requirement for second-draw PPP loans may delay the forgiveness process.
COVID revenue reduction score
One of the requirements for a second-draw PPP loan is a reduction in revenue of 25% or greater during one quarter in 2020 compared to the same quarter in 2019. While the documentation supporting this reduction may have been provided at the time of loan application, many borrowers with loans of $150,000 or less took advantage of the rules allowing them to instead provide the documentation when applying for loan forgiveness.
Supplying and reviewing this documentation has been slowing the loan forgiveness process for those PPP borrowers that chose to provide documentation in connection with their forgiveness application. To streamline this process, the SBA — with the help of a third-party contractor — has developed a revenue reduction score. The score is based on a variety of inputs, including industry, geography, and revenue size. This score is maintained in the SBA platform used by the lenders, which is currently available for review.
If the revenue reduction score meets or exceeds the required score for validation, use of the score will satisfy the requirement to support the revenue reduction requirement. The SBA will shortly release information to assist lenders and borrowers to understand and use the revenue reduction score. The score is not a final determination. If the borrower feels it met the revenue reduction requirement but it is not reflected in the revenue reduction score, it is likely the SBA will allow them to submit the proper documentation to override the score.
Regardless of the revenue reduction score, a borrower will still need to certify that it experienced the required 25% or greater revenue reduction. Borrowers should also maintain appropriate documentation supporting this certification even if the revenue reduction score is used.
Direct Forgiveness Portal
To assist lenders without the technology or resources to develop platforms to efficiently process loan forgiveness, the SBA has created an optional technology solution named the Direct Forgiveness Portal. Lenders need to opt in to this solution. If they do, borrowers will then be able to enter their forgiveness information directly into the SBA platform.
The lender must still review the information in the platform and render a forgiveness conclusion to the SBA. Borrowers should wait to hear from their lenders about the direct borrower forgiveness process. If a lender opts in to the process, they will notify the borrower. Additional guidance on this process is expected shortly, and the Direct Forgiveness Portal opened August 4. The SBA announced that over 600 banks representing over 2.17 million loans of $150,000 or less have already opted in.
Deferral extension for borrowers in the appeal process
Previously, the loan deferral period was not adjusted for a loan forgiveness decision being appealed by the borrower. This IFR extends the deferral period for loans in the appeal process until the SBA’s appeal decision is final.
SBA customer service team
The SBA also announced that a new PPP customer service team will be launched to answer questions and directly assist borrowers with their forgiveness applications.