By: Colleen Lyons
July 29, 2020
While many Paycheck Protection Program (PPP) borrowers have or are in the process of preparing PPP Loan Forgiveness Applications and submitting them to their lenders, the US Small Business Administration (“SBA”) has not yet opened its platform to accept loan forgiveness decisions from lenders. Last Thursday the SBA issued a procedural notice (the “Notice”) outlining the process for PPP lenders to submit those PPP loan forgiveness decisions. The Notice indicates that the SBA’s PPP Forgiveness Platform is in the final stages of development and is not expected to go live and begin accepting submissions from PPP lenders until August 10, 2020; this date may be further extended if there are new legislative amendments to the forgiveness process which necessitate further changes to the system.
In the Notice, the SBA confirmed its previous guidance to lenders about the information they are required to collect from each borrower and reiterated that while the calculation of the loan forgiveness amount is the responsibility of each borrower, lenders are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculations concerning amounts eligible for forgiveness and the required supporting documents. If a lender identifies any errors or missing documentation, the lender is encouraged to work with the borrower to remedy any issues and in no event should a borrower receive forgiveness without submitting all required documentation.
The lender is required to complete its review within 60 days after receiving a complete loan forgiveness application from the borrower. The lender then must issue one of the following decisions to the SBA:
- “Approved in Full” meaning that the lender has approved in full the forgiveness amount requested by borrower and the forgiveness amount requested by lender equals that amount.
- “Approved in Part” meaning that the lender did not approve the full forgiveness amount requested by borrower and the forgiveness amount requested by lender is less than the forgiveness amount requested by borrower. Where a lender selects this option, it must enter its own data for each line item for which it determined a different amount than the amount on the borrower’s loan forgiveness application. The SBA will use the line item amounts entered by the lender to verify the calculations and facilitate the final forgiveness payment amount and associated interest calculation.
- “Denied” meaning that the lender denied the entire forgiveness amount requested by the borrower. If the lender issues this decision to the SBA, the lender is required to submit all of the documentation and data provided by the borrower and provide the SBA with the reasons for denial. The SBA reserves the right to review the lender’s decision in its sole discretion. In the case of a denial, the lender must also provide written notice to the borrower; thereafter the borrower will have 30 days to notify the lender that it is requesting the SBA to review the lender’s decision. The SBA may either decline the request for review, or if it accepts a borrower request for review, notify the borrower and lender of the results.
- “Denied without Prejudice” meaning that the lender has been notified that the SBA has commenced a loan review at the time the borrower submitted a loan forgiveness application.
The lender’s decision will be transmitted through the PPP Forgiveness Platform and accompanied by the following:
- For borrower loan forgiveness applications submitted using SBA Form 3508 or lender’s equivalent form: (1) the PPP Loan Forgiveness Calculation Form (including the representations and certifications page of the application initialed, signed, and dated by an authorized representative of the borrower); (2) PPP Schedule A; and (3) the PPP Borrower Demographic Information Form (if submitted by the borrower), or
- For borrower loan forgiveness applications submitted using SBA Form 3508EZ or lender’s equivalent form: (1) the SBA Form 3508EZ or Lender’s equivalent form (including the representations and certifications page of the application initialed, signed, and dated by an authorized representative of the borrower); and (2) the PPP Borrower Demographic Information Form (if submitted by the borrower).
Within 90 days following submission of the lender’s decision to the SBA, the SBA will remit the appropriate forgiveness amount to the lender, plus interest accrued through the date of payment but reduced for the amount of any Economic Injury Disaster Loan advance. The lender then must notify the borrower of the forgiveness amount paid by the SBA and if different, the amount of the lender’s original forgiveness decision. If only a portion of the loan is forgiven, or if the forgiveness request is denied, any remaining balance due on the PPP loan must be repaid by the borrower on or before the maturity of the loan.
The SBA reiterated that it can review any PPP loan of any size at any time at its discretion. If the SBA initiates a review, it will notify the lender via the PPP Forgiveness Platform. The lender then will have five business days to notify the borrower that it is being reviewed and to provide the borrower Application Form, the Loan Forgiveness Application Form and all related documentation previously submitted to the lender by the borrower. The lender must also request the borrower to provide the lender with the “Documents that Each Borrower Must Maintain but is Not Required to Submit” as identified in the instructions to the Loan Forgiveness Application Form (SBA Form 3508 or 3508EZ).
If the SBA determines that a borrower was ineligible for a PPP loan or for the loan forgiveness amount claimed by the borrower, the SBA will require the lender to contact the borrower in writing to request additional information. The SBA may also request additional information directly from the borrower. The SBA will consider all information provided by the borrower in response to such inquiries. Failure to respond to an SBA inquiry may result in a determination that the borrower was ineligible for a PPP loan or ineligible to receive the loan amount or loan forgiveness amount claimed by the borrower. The Notice confirms that the SBA will be issuing an additional interim final rule outlining the borrower’s appeal rights in the event of an adverse decision.