The U.S. Small Business Administration (SBA) published new guidance on Wednesday that aims to simplify and expedite the forgiving process for businesses and not-for-profit loans with Paycheck Protection Program (PPP) loans of $150,000 or less.
The SBA also announced that it will launch a new application portal on August 4, allowing borrowers to file a pardon request directly with the agency instead of having to go through a lender. More than 600 banks have agreed to allow access to the portal for more than 2.17 million borrowers.
In the 29-page Interim Final Rule (IFR), the SBA provided a COVID Reduction Revenue Score that can be used at the time of the exemption to document the revenue reduction required for PPP loans in the second draw. The new IFR also defines a direct-from-borrower forgiveness process for lenders who choose to sign up as an alternative way to process loan forgiveness requests.
In addition, the IFR extends the loan deferral period for PPP loans in cases where the borrower files a timely appeal of the final SBA loan review decision.
The Public Private Partnership Program has provided more than 11.7 million revocable loans totaling nearly $800 billion to small businesses and other eligible entities affected by the economic impacts of the COVID-19 pandemic. Nearly $400 billion has been pardoned.
Loans of $150,000 or less represented 93 percent of outstanding PPP loans, the agency said.
Despite previous moves to simplify the loan forgiveness process, many small lenders through PPPs have reported to the Small Business Agency that they lack the technology and manpower to develop effective loan forgiveness online platforms to process applications.
Overwhelmed by the volume of PPP loans and subject to the 60-day legal requirement for lenders to issue a forgiveness decision to the SBA from receiving a borrower’s loan forgiveness application, many small lenders place limits on when they accept forgiveness requests from borrowers. This policy leaves borrowers unsure whether to start making PPP loan payments while they wait for their lenders to process their forgiveness requests.
In addition, the Small Business Agency said it has heard concerns from PPP lenders of all sizes that the requirement for borrowers and lenders to submit revenue-reduction documentation review at the time of forgiveness is delaying the forgiveness process for its $150 second draw PPP loans. A thousand dollars or less. .
To address these problems and ease the tolerance bottleneck, the Small Business Administration is making two important changes, which are described below. The Small Business Administration said more guidance for both changes will be rolled out soon.
1. Entering COVID Reduction Points
To simplify the forgiveness of second draw PPP loans of $150,000 or less where the borrower has not submitted revenue reduction documentation at the time of the loan application, the Small Business Agency will provide an alternative form of revenue reduction confirmation.
COVID Revenue Reduction Points will be assigned to each loan by a second PPP of $150,000 or less, generated by a third-party independent contractor in the Small Business Agreement, based on a variety of inputs, including industry, geography, business volume, and economic data. Current about economic recovery and business return to operational status.
The score will be preserved in the SBA’s Loan Forgiveness platform and will be visible to lenders to use as a proxy for revenue reduction documentation. In addition, the result will be visible to those borrowers who submit loan forgiveness requests through the platform using the Borrower Direct Forgiveness process described in the next section.
When the result meets or exceeds the value required to verify the borrower’s revenue reduction, use of the result will satisfy the borrower’s requirements for documenting the revenue reduction. When the result does not meet the value required to verify the borrower’s income reduction, and if the borrower has not already submitted documents to the lender for verification of the borrower’s income reduction, the borrower must submit documents either directly to the lender (for those lenders that are not involved in the borrower’s direct forgiveness process) or Submit the documents to the lender by uploading them to the platform.
2. Launching the Borrower’s Direct Forgiveness Process
The SBA is launching a new Direct Forgiveness process that provides PPP lenders with an optional technology solution that will essentially allow borrowers to apply for loan forgiveness directly to the SBA through the new portal that will launch on August 4.
When a PPP lender chooses a Direct Borrower Forgiveness process, the new portal will provide a single secure site that integrates with the SBA’s PPP platform and allow borrowers with loans of $150,000 or less to apply for loan forgiveness using an electronic equivalent of the SBA form 3508S. Upon receipt of notification that the borrower has applied for forgiveness through the platform, lenders will review the loan forgiveness application and issue a forgiveness decision to the SBA within the platform.
The SBA said the new forgiveness process will provide lenders lower costs, increased efficiency, and timely transfer of SBA forgiveness payments, while borrowers will benefit from the ability to submit loan forgiveness applications directly through the platform and reduce waiting time and uncertainty associated with submission through the lender.
After the Borrower Direct Forgiveness process has been launched, Borrowers shall continue to submit loan forgiveness requests to Lenders, and not through Articles of Association, under the following circumstances:
- The PPP lender does not choose to use the borrower’s direct forgiveness process;
- The amount of the PPP loan to the borrower is greater than $150,000;
- The Borrower does not consent to the data as provided by the SBA’s registration system, or cannot verify its identity in the platform (for example, if there has been an undisclosed change of ownership); or
- For any other reason that the platform refuses to provide the borrower.
Extension of postponement of OHA appeals
The current rule for appeals from final review decisions of a PPP loan states that because the PPP borrower must begin making principal and interest payments on the outstanding balance of the PPP loan when the SBA transfers the amount Forgiveness of the loan to the PPP lender (or by notifying the lender that the loan is not allowed to be forgiven), an appeal by the PPP borrower against any final decision to review the SBA loan does not extend the PPP loan deferment period . 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 a PPP loan until the SBA’s Office of Hearings and Appeals (OHA) issues a final decision on the appeal. The revised OHA rule will state 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 petition must be filed with OHA within 30 calendar days after the appellant receives the final SBA loan review decision.
The new SBA direct loan process and portal is discussed at length in two recent AICPA Town Hall webcasts, which address other PPP tolerance issues and calculations. Web replay is available for free at AICPA TV.
AICPA experts discuss the latest PPP and other small business assistance programs during a virtual town hall held every two weeks. The webcast, which provides CPE credit, is free for AICPA members and $39 for non-members. go to AICPA Town Hall Series For more information and to register. Town Hall event recordings are free to watch AICPA TV.
the AICPA Paycheck Protection Program Resource Page Featuring the resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
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– Jeff Drew (Jeff.Drew@aicpa-cima.com) he hollow Senior Editor.