PPP Loan Forgiveness: What to Expect Next
By Amy Lou Blunt, Executive Vice President and Chief Credit Officer
On July 23, 2020, the SBA released formal procedures for lender submission of Paycheck Protection Program loan forgiveness decisions. Lenders will be able to begin forwarding decisions on loan forgiveness application amounts as early as August 10, 2020.
For those who have already begun submitting your applications, lenders have been able to review applications for completeness, but not much else. Now that procedures have been provided, as well as information regarding a new online submission portal to upload information to the SBA and the date it should become available, this seems to be a good time to recap the process for borrowers, as well what to expect from your lender.
Loan Forgiveness Process
To receive PPP loan forgiveness, you must complete and submit the Loan Forgiveness Application (SBA Form 3508 or 3508EZ) to your lender. 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.
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 3508, or 3508EZ;
- Confirm receipt of required supporting documentation;
- Confirm the borrower’s calculations submitted on the Form 3508 or 3508EZ; and
- 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.
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. Instructions for Form 3508 and Instructions for Form 3508EZ can be found by clicking on these links. Make sure to identify your Covered Period for reporting purposes, gather your required documents, and complete your calculations.
Here to Help
The health pandemic and impact on both our economic and personal lives has been stressful, to say the least. Hopefully, gaining more definition to the steps toward closure of this program will give you a bit of relief, and move us one more step toward finding our way forward again. As always, please let us know if we can be of assistance.