The Small Business Association (SBA) will accepting PPP loan forgiveness applications submitted by lenders on its portal beginning August 10, 2020. The portal’s opening date is subject to extension if Congress makes changes to the loan forgiveness process, and current legislation is being considered for automatic forgiveness of PPP loans of $150K or less (87% of PPP loans fall into this category). The House Small Business Committee hearing is currently reviewing the Small Business Administration and Treasury pandemic programs.  U.S. Treasury Secretary Steven Mnuchin advised the committee last Friday that “We should consider forgiving all small loans but would need fraud protection.”

How to Apply for PPP Loan Forgiveness

To receive PPP loan forgiveness, a borrower must complete and submit the Loan Forgiveness Application (SBA Form 3508, 3508EZ, or Lender equivalent) to its lender. A borrower may submit a Loan Forgiveness Application before the end of the 8-week or 24-week covered period, provided that the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness and the borrower’s loan forgiveness application accounts for any salary reductions in excess of 25 percent for the full covered period.

The lender of record’s review of the Loan Forgiveness Application will follow SBA Loan Review Procedures and Related Borrower and Lender Responsibilities. The Administrator, in consultation with the Secretary of the Treasury, has determined that it is appropriate to adopt additional procedures and criteria through which SBA will review whether an action by the borrower has resulted in its receipt of a PPP loan that did not meet program requirements. The SBA may review any PPP loan, as the Administrator deems appropriate. The Administrator may review whether a borrower is eligible for the PPP loan based on the provisions of the CARES Act at the time of the borrower’s PPP loan application, and the terms of the borrower’s loan application.

The PPP Loan Forgiveness Process for Lenders – What Should Lenders Review?

The lender procedures outlined in the Federal Register are as follows:

  1. Confirm receipt of the borrower certifications contained in the Loan Forgiveness Application Form.
  2. Confirm receipt of the documentation borrowers must submit to aid in verifying payroll and non-payroll costs, as specified in the instructions to the Loan Forgiveness Application Form.
  3. Confirm the borrower’s calculations on the borrower’s Loan Forgiveness Application, including the dollar amount of the:
    • Cash Compensation, Non-Cash Compensation, and Compensation to Owners claimed on Lines 1, 4, 6, 7, 8, and 9 on PPP Schedule A and;
    • Business Mortgage Interest Payments, Business Rent or Lease Payments, and Business Utility Payments claimed on Lines 2, 3, and 4 on the PPP Loan Forgiveness Calculation Form, by reviewing the documentation submitted with the Loan Forgiveness Application.
  4. Confirm that the borrower made the calculation on Line 10 of the Loan Forgiveness Calculation Form correctly, by dividing the borrower’s Eligible Payroll Costs claimed on Line 1 by 0.60. Providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and the borrower attests to the accuracy of its reported information and calculations on the Loan Forgiveness Application.

Good Faith Review

Lenders are expected to perform a good faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning amounts eligible for loan forgiveness. For example, minimal review of calculations based on a payroll report by a recognized third-party payroll processor would be reasonable. By contrast, if payroll costs are not documented with such recognized sources, more extensive review of calculations and data would be appropriate. The borrower shall not receive forgiveness without submitting all required documentation to the lender.

Lenders may rely on borrower representations. If the lender identifies errors in the borrower’s calculation or material lack of substantiation in the borrower’s supporting documents, the lender should work with the borrower to remedy the issue. The lender does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its request for loan forgiveness and attests that it accurately verified the payments for eligible costs.

The lender must issue a decision to SBA on a loan forgiveness application not later than 60 days after receipt of a complete loan forgiveness application from the borrower.

The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to SBA.

Are You Ready to Apply for Loan Forgiveness?

If you have questions about PPP loan forgiveness, our COVID-19 Advisory Team can help. And, if your loan is $2 million or less and you’re targeting the 8-week period for forgiveness, take our PPP Loan Forgiveness Quick Test. One of our experts will review your test and contact you with recommended next steps.

Additional Resources

Visit Barnes Dennig’s COVID-19 Resource Center for a comprehensive list of resources. Please contact our COVID-19 Advisory Team or any of our leadership team at Barnes Dennig to discuss.

Barnes Dennig COVID-19 Advisory Team Leaders: