PPP Loan Forgiveness: What to Expect Next
By Amy Lou Blunt, Executive Vice President and Chief Credit Officer
On October 8, 2020, the SBA released a simpler loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less. The new Form 3508S is expected to streamline the process while also protecting against fraud.
SBA began approving PPP forgiveness applications and remitting forgiveness payments for PPP borrowers on October 2, 2020. SBA indicated it will continue to process all PPP forgiveness applications in an expeditious manner.
Some of you have already begun submitting your applications. The Bank has been able to review your applications for completeness and submit them for processing. A few things to note as a result of the new form:
- If you have a loan of $50,000 or less and have already submitted your PPP loan forgiveness application, there’s no need for any action. Your application will be processed.
- If you qualify for the simpler Form 3508S and choose to use one of the prior forms, your applications will be processed.
Now that we have a new form in place and have been processing and submitting applications on behalf of our clients, this seems like a good opportunity to recap the process and help you avoid some common mistakes we are seeing.
Loan Forgiveness Process
To receive PPP loan forgiveness, you must complete and submit to your lender one of the Loan Forgiveness Applications:
Instructions for the forms can be found on these links:
You may submit a Loan Forgiveness Application before the end of the 8-week or 24-week covered period, provided:
- You have used all of the loan proceeds for which you are requesting forgiveness, and
- Your loan forgiveness application accounts for any salary reductions in excess of 25 percent for the full covered period.
Avoid Common Application Errors
Covered Period. Several of our clients have made errors in the covered period calculation. The Covered Period is either the 24-week period beginning on the PPP Loan Disbursement Date, or if you received your PPP loan before June 5, 2020, you can choose an eight-week Covered Period. However, if you choose the eight-week covered period, every expense needs to be paid within that period. If you have any expenses outside that eight-week period, you need to choose the 24-week Covered Period.
Wrong Lender or Loan Numbers. The Lender Number and Loan Number are on your loan documents, however, if you can’t locate them or don’t know them, please call us and we’ll provide them to you.
The Bank’s PPP Loan Forgiveness Role
Your Lender will review your application and all required supporting documents. It is your Lender’s responsibility to:
- Confirm receipt of all borrower certifications contained in Form 3508S, Form 3508, or Form 3508EZ;
- Confirm receipt of required supporting documentation;
- Confirm the borrower’s calculations submitted on the forms
- Confirm the correct calculation on Line 10 (Form 3508) or Line 7 ( 3508EZ )
If there are any errors, omissions, or discrepancies, your lender will contact you to resolve. Per the SBA, “The borrower shall not receive forgiveness without submitting all required documentation to the Lender.”
Your Lender must complete the review and issue a decision regarding the amount of forgiveness, and submit the package to the SBA within 60 days of receipt of a complete application. That decision could result in one of four possible outcomes:
- Approval, in whole
- Approval, in part
- Denial without prejudice, due to a pending SBA review of the loan
The first three possible outcomes are up to your lender; the fourth is only at the direction of the SBA. If your application for forgiveness is approved, in whole or in part, your lender requests payment from the SBA at the time of the decision. The SBA, subject to review, will then remit the appropriate forgiveness amount to the lender plus accrued interest, no later than 90 days after the lender submits its decision to the SBA.
Please understand, while we at RBAZ can provide helpful guidance and clarification regarding the forgiveness process, we cannot complete the application for you or provide direction on the details of your application.
Your Lender is responsible for notifying you of the forgiveness amount paid by the SBA. If the forgiveness amount paid by the SBA is less than the amount determined by your lender, your lender will also notify you of the amount of the lender’s decision. Any remaining balance due on the loan must be repaid by the borrower on or before the maturity of the loan.
If your lender denies your application for forgiveness in full, your lender must notify you in writing of its decision. In this situation, you have the right to appeal your lender’s decision within 30 days of notice, by requesting SBA review. Within 5 days of receipt of your request for review, your lender must notify the SBA of your request.The SBA reserves the right to review your lender’s decision in its sole discretion
Secure Online Portal Provided for Lenders
The SBA has partnered with a financial services technology provider to create a secure platform dedicated to accept loan forgiveness decisions, supporting documentation and requests for forgiveness payments. As in the loan application process, this portal is available only to your lenders.
If you have exhausted your PPP loan proceeds, now is the time to start preparing your Loan Forgiveness Application.