SBA issues guidance on PPP loan forgiveness

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The Small Business Administration and Treasury Department quietly issued more guidance for the Paycheck Protection Program as legislators look to make more fixes to the emergency loan program.

One of the interim final rules, issued late Friday night, focused on the requirements for having PPP loans forgiven. The other rule provided direction on lenders’ duties during the forgiveness period, along with the SBA process for reviewing loans.

Banks will be required to issue decisions on borrowers' forgiveness applications within 60 days after receiving them. The SBA said it would then pay the lenders within 90 days.

The SBA stated that it has the right to review any loan, though it will evaluate them based on the “rules and guidance available at the time of the borrower’s PPP loan application." The agency said it is preparing a separate rule to lay out an appeals process for borrowers.

Lenders will lose the fees for any loans deemed to be ineligible, and the SBA said it could claw back already issued fees. The rules also outlined more qualifications for payroll expenses and established limits for how much loan forgiveness is available for owner-employees.

Bankers seemed unimpressed with the latest guidance, which did not extend the amount of time borrowers have to use the funds beyond its current eight-week period. The rules also did not reduce the payroll requirement, which currently stands at 75% of PPP funds.

“Just another Friday night where [SBA and Treasury] continue to muddy the … water to make it as complicated as possible to obtain forgiveness and bankers to manage it,” Brad Bolton, president and CEO of Community Spirit Bank in Red Bay, Ala., tweeted on Saturday.

Several other bankers quickly agreed with Bolton’s assessment.

“They had us make a bunch of loans to businesses that don’t qualify with the old ‘don’t worry’ and now it’s on us,” said Ken Clayton, chairman and CEO of Western Bank in Artesia, N.M.

Legislators, meanwhile, are considering bills that would give borrowers up to 24 weeks to deploy PPP funds and allow them to spend more than a quarter of the money on nonpayroll expenses. The Senate and House have different proposals under consideration.

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Paycheck Protection Program SBA Treasury Department Small business lending Coronavirus