With the last day for the SBA to accept Paycheck Protection Program (PPP) Loan Applications (August 8) quickly approaching, a recent announcement from the SBA reveals the next key date in the process to seek loan forgiveness. On August 10, 2020, the SBA has confirmed that Lenders may begin submitting decisions on borrower loan forgiveness applications, requesting payment of the forgiveness amount determined by the Lender, and managing SBA correspondence and reviews through the SBA’s new newly created portal called the PPP Forgiveness Platform.
Here is what you can expect in navigating the PPP Loan forgiveness process, according to this new guidance.
PPP Loan Forgiveness Process – Roles and Responsibilities
If the borrower has used all of the loan proceeds for which they are requesting forgiveness and the loan accounts for any salary reductions in excess of 25 percent for the full covered period, they may submit a Loan Forgiveness Application before the end of the 8-week or 24-week covered period. Borrowers should note that they are required to submit their forgiveness application within 10 months after the end of the borrower’s chosen covered period. They may use SBA Form 3508, 3508EZ, or the Lender equivalent. The borrower is responsible for completing all required forms and submitting to the Lender to receive PPP Loan forgiveness.
Upon receiving and reviewing the completed application using SBA Loan Review Procedures and Related Borrower and Lender Responsibilities , the Lender is responsible for performing a good-faith review and providing an accurate calculation of the loan forgiveness amount. If the Lender identifies errors in the borrower’s calculations or a lack of substantiation in the borrower’s supporting documents, the Lender should work with the borrower to remedy the issue. Within 60 days of receiving the loan forgiveness application, the Lender must complete the review of the application and issue a decision to SBA, along with the required documents. Decisions include an approval (in whole or in part), denial, or, (if directed by SBA) a denial without prejudice due to a pending SBA review of the loan for which forgiveness is sought.
Within 90 days of receiving a completed application from a Lender, the SBA will remit the appropriate forgiveness amount to the Lender, plus any interest accrued through the date of payment, subject to any SBA review of the loan or loan application. If applicable, the SBA will deduct EIDL Advance amounts from the forgiveness amount remitted to the Lender as required by Section 1110(e)(6) of the CARES Act.
At this point in the process, the Lender is responsible for notifying the borrower of the forgiveness amount paid by SBA to the Lender, including the decision to repay less than the desired amount. If only a portion of the loan is forgiven, or if the forgiveness request is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity of the PPP loan.
The PPP Forgiveness Platform
The PPP Forgiveness Platform is available only to PPP Lenders, not PPP borrowers. After providing a single point of contact and email address, PPP Lender Authorizing Officials (AOs) currently in the CAFS/ETRAN system will receive instructions from the SBA and access starting August 10, 2020. Failure to provide this information may result in the rejection of loan forgiveness submissions and payments.
Once submitted in the PPP Forgiveness Platform, a loan’s forgiveness status should be tracked in this portal. Lenders should note that correcting a submission in the PPP Forgiveness Platform will restart the 90-day period for the SBA’s payment remittance.
Additional Preparation and Consideration for Lenders
As noted in the recent SBA announcement, Lenders must confirm the following for each PPP forgiveness submission before SBA will accept the submission:
1) this submission accurately reflects the Lender’s decision regarding the borrower’s loan forgiveness application;
2) the information provided by the Lender to SBA with this submission accurately reflects the Lender’s records for the PPP loan;
3) the Lender has made its decision in accordance with the requirements set forth in Part III.2.a. of the PPP Interim Final Rule on SBA Loan Review Procedures and Related Borrower and Lender Responsibilities, as amended;
4) the PPP loan has not been cancelled or repaid; and
5) the Lender has not issued a previous loan forgiveness decision to SBA for this PPP loan, unless this is a resubmission following a rejection or a reconsideration of a denial without prejudice.
In addition, for borrower loan forgiveness applications submitted using the SBA Form 3508 or Lender’s equivalent form, the Lender must submit the following in the Forgiveness Platform:
1) the PPP Loan Forgiveness Calculation Form (including the representations and certifications page of the application initialed, signed, and dated by an authorized representative of the borrower);
2) PPP Schedule A; and
3) the PPP Borrower Demographic Information Form (if submitted by the borrower).
And, for borrower loan forgiveness applications submitted using the SBA Form 3508EZ or Lender’s equivalent form, the Lender must submit the following in the Forgiveness Platform:
1) the SBA Form 3508EZ or Lender’s equivalent form (including the representations and certifications page of the application initialed, signed, and dated by an authorized representative of the borrower); and
2) the PPP Borrower Demographic Information Form (if submitted by the borrower).
If the Lender determines the borrower is not entitled to forgiveness, the Lender must submit this same documentation along with a reason for denial.
Final Rule for Borrowers
Lastly, it’s important to note that a borrower may appeal the SBA’s determination of ineligibility for PPP Loan forgiveness or a different amount of loan forgiveness. Stay tuned for an interim final rule addressing the appeal process soon. To see other PPP Loan insights from Gross McGinley, please click here.
Attorney Loren Speziale collaborates with business owners and human resource professionals, providing legal guidance for a wide variety of operational and personnel matters.