Government says it will start forgiving PPP loans within days
The federal government is set to begin forgiving emergency loans made to small businesses under the Paycheck Protection Program. But the exact start time for application approvals and whether loans of a certain size would automatically qualify for forgiveness remain uncertain.
On Thursday, a spokesperson for the Treasury Department confirmed by email that the Small Business Administration would start approving forgiveness applications for PPP loans this week or early next week. The department and the SBA oversee the program. The Wall Street Journal and the New York Post previously reported the forgiveness plan.
An SBA spokeswoman declined to comment on the specific date forgiveness would begin or whether automatic forgiveness would be possible for certain loans.
The news comes as bankers grow weary of waiting for the SBA — which opened its forgiveness portal on Aug. 10 — to sign off on forgiveness requests. To date, the SBA has not acted on tens of thousands of applications that have been submitted in the seven weeks since.
The $659 billion program was designed to provide emergency funding for small businesses struggling to stay afloat during the early months of the coronavirus pandemic. By Aug. 8, when the program closed, the SBA had approved 5.2 million PPP loans totaling $525 billion. More than $133 billion remains unallocated.
More than 100 trade groups, including the American Bankers Association, the Independent Community Bankers of America and the Consumer Bankers Association, sent a letter to lawmakers on Sept. 17 urging automatic forgiveness for PPP loans of $150,000 or less. The coalition estimated a streamlined process would eliminate $7 billion in administrative costs. The ABA and 51 state banking associations sent a similar letter to Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza the next day.
Lenders have been pressing lawmakers to resume and revamp PPP, saying they want the streamlined forgiveness process and permission to make new loans to PPP borrowers who show ongoing stress from the coronavirus pandemic.
Congress is considering several proposals that would restart the program, but for now it sits idle as lawmakers negotiate over a possible second stimulus package.
"It is welcome news that small-business borrowers will start receiving some clarity on having their PPP loans forgiven,” said James Ballentine, executive vice president of congressional relations for the American Bankers Association.
Yet “we continue to urge Congress, SBA and Treasury to take immediate action to further streamline and simplify the forgiveness process,” Ballentine said. “This would help over 4 million small businesses across the country and further strengthen the program's already significant economic impact."
Mnuchin told the House Financial Services Committee last week that automatic forgiveness for smaller PPP loans is not within the Treasury's current authority and would require legislation.
"We don't think we have the authorization to do a blanket forgiveness across the board," Mnuchin testified during a hearing on the federal government's response to the pandemic.
Meanwhile, in testimony Thursday before the House Small Business Committee, William Shear of the Government Accountability Office said the SBA's efforts to get PPP funds to so many small businesses in a four-month period means there is significant risk that some fraudulent or misleading applications were approved. The GAO is calling on the SBA to implement plans to better identify and respond to risks in the Paycheck program.
"We continue to be concerned about the potential for fraud in PPP and are continuing to conduct work on the program, including on internal controls and fraud risk management," said Shear, the GAO's director of financial markets and community investment.