PPP forgiveness plan leaves bankers wanting

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Paycheck Protection Program lenders should circle Aug. 10 on their calendars.

It’s the date the Small Business Administration expects to launch its long-awaited portal through which lenders will seek approval of their PPP-loan forgiveness decisions, according to a procedural notice issued by the agency Thursday.

The SBA plans to email instructions for using the portal to lenders before the launch, the document says. Lenders will be able to electronically submit applications individually, or in batches using an application programming interface that will be made available on the portal.

Neither the SBA nor Goldschmitt-CRI, the Reston, Va., contractor hired to help construct the forgiveness platform, immediately commented Friday.

A number of trade groups, including the American Bankers Association, Consumer Bankers Association and National Association of Federally-Insured Credit Unions, said Friday they were still reviewing the document.

Timeline of SBA forgiveness application process

The SBA released its initial forgiveness application May 15 and followed up with a shorter version about a month later. Until the procedural notice, the agency had neither explained how lenders could transmit completed applications to the agency, nor indicated how closely they were expected to review them.

The SBA’s instructions make it clear that calculating how much of a loan can be forgiven is the borrower’s responsibility — either on the longer SBA Form 3508 or the shorter 3508EZ. At the same time, the instructions state lenders “are expected to perform a good-faith review in a reasonable time” of the borrower’s calculations and supporting documents.

The SBA allows lenders 60 days to review applications. It says it will provide payment within 90 days of receiving a forgiveness application that it approves.

The procedural notice states the lender is responsible for notifying the borrower of any forgiveness amount the SBA remits. If a lender denies a borrower’s forgiveness application, the borrower has 30 days to appeal. Once a lender receives an appeal, it has five days to transmit it to the SBA.

The procedural notice is important because it fills in critical gaps in the forgiveness process, Alison Holt-Fuller, head of product and enterprise first line risk management at the $19.8 billion-asset Atlantic Union Bankshares in Richmond, Va., said Friday.

“After the borrower submits an application and we process it, we had no idea of how it would get to the SBA or what need to go to SBA,” Holt-Fuller said. “It definitely fills that hole.”

Holt-Fuller also praised the SBA’s decision to include batch-submission capacity in the portal.

“With not knowing how we were going to submit, we were kind of going down parallel paths of what it would look like if we had to do it on an individual basis, but really wanting that batch process to be able to go through,” Holt-Fuller said.

As of Thursday, the SBA had reported just under 5 million approved paycheck protection loans for $519 billion. For many of the program’s 5,456 lenders, the prospect of processing forgiveness applications for the hundreds of thousands of PPP loans in their portfolios presents a substantial logistical challenge, even with the 60-day window outlined in the procedural notice.

A number of banking and credit union advocacy groups are backing legislation in the House and Senate that would streamline forgiveness for PPP loans of $150,000 or less. The bill offers forgiveness if borrowers complete a brief attestation certifying loan funds were used in accordance with PPP guidelines.

By contrast, the SBA’s standard application, Form 3508, is 11 pages, while the 3508EZ alternative is three pages. Groups representing lenders and borrowers have complained that the calculations and supporting documents required by both applications are a major burden for smaller PPP borrowers, many of whom can’t afford to hire accountants and other professionals available to larger companies.

“Small businesses should be focused on reopening their doors and serving their customers, not filling out complex government calculations,” Bank Policy Institute President and CEO Greg Baer said in a press release Friday.

Another industry source, who asked not to speak for attribution because of the sensitivity of the topic, said the process is taxing on lenders, too.

“The forgiveness process outlined by SBA is overly burdensome for small businesses and banks,” the source said. “This is why the bipartisan push in Congress to streamline forgiveness — something [Treasury] Secretary Mnuchin and the Center for Responsible Lending have both supported — is so important.”

Congress authorized the Paycheck Protection Program as part of the massive, $2.2 trillion stimulus package it enacted in March. The program, which began April 3, offers small businesses with 500 or fewer employees impacted by the coronavirus pandemic loans up to $2 million. Loans proceeds spent on occupancy costs, utilities and certain other basic operational expenses, along with payroll and benefits costs, are eligible for forgiveness by the SBA, which is administering the program in partnership with the Treasury Department.

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