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PPP Forgiveness update 10/2/20

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SBA Expected to Begin PPP Loan Forgiveness Next Week, Releases New Procedural Guidance

 

     

 

October 2, 2020
Jessica L. Jeane
Director of Public Policy and Communications, National Society of Accountants

The U.S. Small Business Administration (SBA) is expected to begin processing and issuing forgiveness for some Paycheck Protection Program (PPP) loans next week, according to a Treasury spokesperson. The announcement comes on the heels of a multitude of criticisms from lawmakers, small businesses, and lenders alike that the SBA has not finalized any PPP loan forgiveness applications.

PPP Loan Forgiveness

“We are disappointed in the complete lack of [PPP] loan forgiveness approvals and write to ask when small businesses will begin receiving loan forgiveness and for more information about these delays,” several lawmakers wrote in a September 30 letter to Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza. “[D]espite receiving nearly 100,000 applications for loan forgiveness since early August, not a single one has been either approved or rejected.”

Furthermore, many lawmakers on Capitol Hill have expressed concern regarding small businesses’ and lenders’ shared complaints that the PPP loan forgiveness application process itself is arduous and unclear. “The complexity of the forgiveness process is one of the factors that, in my opinion, has resulted in a very low submission rate of forgiveness applications to SBA,” Lynn Ozer, president of SBA lending at Fulton Bank, told lawmakers at a House Small Business subcommittee hearing last week. “Borrowers and lenders simply have been unable to complete the application process because they do not fully understand the requirements for forgiveness and are reluctant to submit incorrect applications that could cause them to lose the forgiveness to which they are entitled, or worse, get into trouble with the federal government,” Ozer added.

On that front, several PPP bills have been introduced on Capitol Hill, and there is general bipartisan support for streamlining the forgiveness application process as well as reopening the PPP to provide certain small businesses a second round of loans. However, given the current political climate on Capitol Hill, chances of seeing a stand-alone PPP bill clearing Congress, or finding another legislative vehicle on which a PPP measure could ride procedurally before the November election, are increasingly slim.

Mnuchin Encourages Small Businesses to Apply for Forgiveness

Notwithstanding the reported issues, Secretary Mnuchin during a discussion with Rep. Tom Reed, R-N.Y., on October 2, encouraged small businesses to apply for loan forgiveness while simultaneously acknowledging the complicated process. “I appreciate that for many small businesses the forgiveness process is a little bit complicated…we do support a bipartisan fix to simplify the process for loans that are $150,000 or less,” Mnuchin said. “Unfortunately, without legislation there is only so much we can do. We are trying to work on a solution [administratively] for loans that are $50,000 and less, that at least makes it slightly easier, and hopefully we will roll that out in the next week.”

SBA Procedural Notice

Meanwhile, the SBA on October 2 released a new Procedural Notice offering sub-regulatory guidance related to changes of ownership of an entity that has received PPP funds. “Prior to the closing of any change of ownership transaction, the PPP borrower must notify the PPP Lender in writing of the contemplated transaction and provide the PPP Lender with a copy of the proposed agreements or other documents that would effectuate the proposed transaction,” the SBA wrote in the October 2 notice issued to SBA employees and PPP lenders. Additionally, the notice outlines several different procedures that are required depending on the circumstances of the change of ownership.