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Since the CARES Act created the Paycheck Protection Program (PPP) last March, dozens of changes have affected eligibility, loan forgiveness, deductibility of proceeds, and even a new second draw option. Given the urgency to launch the program, there was little time to develop the needed policies and procedures. In recent months, the Small Business Administration (SBA) has not made many changes as the loan application deadline passed and no additional funding from Congress has been made. However, as more borrowers apply for loan forgiveness, new issues and challenges have arisen, necessitating action. On July 28, 2021, the SBA issued a new Interim Final Rule (IRF), making several changes to reduce inefficiencies in the forgiveness process. To help clients, prospects, and others, JLK Rosenberger has provided a summary of the key details below.
SBA Loan Forgiveness Portal
Due to feedback from lenders that the current forgiveness process is creating delays, the SBA announced a new online portal. The primary purpose is to allow borrowers to apply for forgiveness directly and make it easier for lenders as well. Unfortunately, not all borrowers will be able to use the portal. In order to qualify, the following conditions must be met, including:
- The PPP lender must opt-in to use the SBA’s online portal.
- The loan amount cannot exceed $150,000.
- Borrowers must agree with the data provided by the SBA and validate their identity from within the system.
- The portal must not reject the borrower’s submission for any other reason. If this happens, the borrower is then required to contact the lender to identify an alternative means of application submission.
COVID Revenue Reduction Score
For those who received a second draw PPP loan, there is a requirement to have experienced a revenue reduction of 25% or more during one 2020 quarter compared to the same time period in 2019. For second draw borrowers with loans less than $150,000, a certification must be submitted before loan forgiveness can be considered. This includes relevant information and documentation which must be compiled and submitted. Unfortunately, the current certification process has caused delays as lenders need more time to review and approve submitted information.
To make the process easier, the SBA has introduced a COVID Revenue Reduction Score using a variety of inputs such as industry, geography, business size, and information on the economic recovery. An automatic score will be assigned to each borrower within the new portal and be visible to lenders to use as an alternative to document revenue reduction compliance. In cases where the score is not adequate, borrowers will be required to submit additional documentation by uploading it to the portal.
Extended Loan Deferments
Under current regulations, once the loan forgiveness amount has been determined, if any balance remains, the borrower must begin making payments of principal and interest. Unfortunately, if the borrower elects to appeal the decision, loan payments must still be made. The IFR amends the process to allow a borrower submitting an appeal to have the deferment extended until the Office of Hearings and Appeals (OHA) issues a final decision on the matter. Under the change, a borrower must notify the lender of the appeal in order to receive a deferment.
The changes announced last week will be made effective in the coming weeks. The SBA has already indicated that additional guidance will soon be published outlining how borrowers and lenders can use these new tools to expedite the forgiveness process. If you have questions about the information outlined above or need assistance with PPP loan forgiveness, JLK Rosenberger can help. For additional information, call us at 949-860-9902 or click here to contact us. We look forward to speaking with you soon.