The Small Business Administration (SBA) has set a date of August 10th for lenders to begin submitting forgiveness applications for Paycheck Protection Program (PPP) loans. On July 23rd, the SBA issued a procedural notice (linked here) to lenders outlining the process of applying for forgiveness for their borrowers. The SBA has created a forgiveness platform for lenders use only for the process.
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% for the full covered period.
In the notice, the SBA once again stressed that “providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and Lenders may rely on borrower representations. 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 forgiveness.” It went on to say that the Lender must review the application and submit its decision on forgiveness, with supporting documents, to the SBA no later than 60 days after its receipt from the borrower. Furthermore, the SBA will have the opportunity to review all PPP loans at any time, if needed.
PPP loan recipients applying for forgiveness should expect the following:
- Borrower is to submit SBA Form 3508 or 3508EZ (or Lender’s equivalent Loan Forgiveness Application) to the lender servicing their loan
- Lender is to confirm receipt of the application and required supporting documentation (payroll and nonpayroll costs)
- Lender is to confirm the borrower’s calculations on Form 3508 or 3508EZ (or Lender’s equivalent Loan Forgiveness Application)
- Lender is to review eligible expenses and supporting documentation provided by the borrower
- If the lender finds errors in the borrower’s calculations or does not feel the documentation provided is substantial for forgiveness, the Lender is expected to work with the borrower to resolve the outstanding issues.
The lender must indicate their decision as:
- Approval in Full
- Approval in Part
- Denied without Prejudice
What should borrowers do to prepare? Talk to your lenders!
Regardless of the Covered Period a borrower chooses, it is critical to begin conversations about loan forgiveness procedures with lenders as soon as possible, particularly since lenders will be making the initial review before it goes to the Small Business Administration (SBA) for final approval.
Borrowers should get clarity from their lender on the forgiveness process, including:
- Will applications be accepted on the SBA’s paper forms or will an online submission be required?
- Is the lender requiring borrowers to submit documentation via email, an online portal, or in some other way?
- What formats are acceptable when submitting supporting documentation?
How We Can Help
Our team is able to assist you during the process of applying for PPP loan forgiveness. We anticipate there may be modifications to the terms of the Paycheck Protection Program in the coming weeks and our team is closely monitoring the situation. We will update you as any such changes or new laws are released. Please contact your trusted Scheffel Boyle team member with questions. We are always here to help.