SBA Streamlines Forgiveness Process for Most PPP Loans

July 28, 2021

The U.S. Small Business Administration (SBA) recently published guidance to help simplify the forgiveness process for businesses and not-for-profits with Paycheck Protection Program (PPP) loans of $150,000 or less.

The change comes in response to feedback the SBA received from smaller PPP lenders who have had difficulty in keeping up with the volume of loans. Smaller lenders have expressed to the SBA that they lack the resources to develop efficient electronic loan forgiveness platforms. The SBA is also responding to concerns from PPP lenders of all sizes that the requirement for borrowers to submit and lenders to review revenue reduction documentation at the time of forgiveness is delaying the process for second-draw PPP loans of $150,000 or less.

In a 29-page Interim Final Rule (IFR), the SBA introduced a COVID Revenue Reduction Score that can be used at the time of forgiveness to document the required revenue reduction for second-draw PPP loans. The new IFR also establishes a direct borrower forgiveness process for lenders that choose to opt in as an alternative method of processing loan forgiveness applications. The IFR also extends the loan deferment period for PPP loans in cases when the borrower files a timely appeal of a final SBA loan review decision.

Each second-draw PPP loan of $150,000 or less will be assigned a COVID Revenue Reduction Score tabulated by an independent SBA contractor. The score will consider inputs such as industry, geography, business size and economic data. The score will be maintained in the SBA’s loan forgiveness platform and will be visible to lenders to use as an alternative way to document revenue reduction. It will also be visible to borrowers that submit forgiveness applications through the platform using the new direct borrower forgiveness process.

When the score meets or exceeds the value required for validation of the borrower’s revenue reduction, the requirement for the borrower to document the reduction will be satisfied. When the score does not meet the required value, the borrower must provide documentation directly to the lender (for lenders that do not opt in to the direct borrower forgiveness process) or upload it to the platform.

The direct borrower forgiveness process will provide a new portal, launching Aug. 4, that integrates with the SBA’s PPP platform and allows borrowers with loans of $150,000 or less to apply for loan forgiveness using an electronic equivalent of SBA Form 3508S. Upon receipt of notice that a borrower has applied for forgiveness through the platform, lenders will review the application and issue a forgiveness decision to the SBA inside the platform.

The SBA clarified that borrowers should continue to submit loan forgiveness applications to their lenders, rather than through the new direct platform, if their lender does not opt in to use the platform or if the borrower’s loan amount is greater than $150,000. If the borrower finds there are issues with their on data on record in the platform, or if the platform rejects the submission, the borrower should submit their loan forgiveness application to their lender as well.

The IFR also extends the loan deferment period for PPP loans in cases when the borrower files a timely appeal of a final SBA loan review decision until the SBA’s Office of Hearings and Appeals (OHA) issues its final decision. The revised OHA rule states that the borrower should notify the lender of the appeal so the lender can extend the deferment period. An appeal petition must be filed with OHA within 30 calendar days after the appellant’s receipt of the final SBA loan review decision.

The SBA stated that further guidance on these issues will be released soon.