The PPP Forgiveness Process
July 28, 2020
On July 23, 2020, the SBA issued a Procedural Notice to Paycheck Protection Program (PPP) lenders that addresses the procedures for lenders to submit PPP loan forgiveness decisions to the SBA.
The forgiveness process could take up to 150 days after a borrower submits its complete Loan Forgiveness Application (LFA) to its lender. The process outlined below highlights various scenarios borrowers may encounter in the forgiveness process, including partial approvals of the requested forgiveness amount and denials. As described below, PPP lenders will gain access to an online Forgiveness Platform on August 10, 2020.
Steps for Loan Forgiveness:
- The borrower completes and submits the LFA to its lender. Borrowers may submit their LFA before the end of their 8-week or 24-week covered period as long as (i) the borrower has used all of the funds they are requesting forgiveness for and (ii) the loan forgiveness application reflects any salary reductions of 25% or more for the entire covered period (even if the borrower is applying for forgiveness before their 8 or 24 week covered period ends).
See our previous article on these rules here.
- Lender reviews the LFA within 60 days of receiving the complete LFA, including:
- Confirming receipt of the borrower's certifications in the LFA
- Confirming receipts of the documents needed to verify payroll and nonpayroll costs (borrowers cannot receive forgiveness without submitting all required documentation to their lender)
- Confirming borrower's calculations included in the LFA (including payroll costs, mortgage interest payments, rent or lease payments and business utility payments)
- Remember, it's the borrower's responsibility to provide accurate calculations and lenders may rely on the borrower's representations in addition to completing their own good faith review
- If the lender finds any issues in the calculations or a "material lack of substantiation" in the borrower's documentation, the lender should work with the borrower to resolve this
The lender's decision to the SBA can be an: approval (in whole or in partdenialdenial without prejudice in cases where the SBA's review of the loan is pending (reminder: the SBA may review PPP loans of any size at any time at its discretion and lender must notify borrower when this occurs).
If the lender denies a borrower's LFA in full, the lender must notify the borrower that they issued a decision to the SBA denying the application – within 30 days of receiving that notice from a lender; a borrower may notify the lender that it requests the SBA to review the lender's decision and the lender must notify the SBA of such request within five days of receiving the request from borrower. The SBA may deny this request for review. If the SBA accepts the borrower's review request, the SBA will notify the borrower and the lender of the results of their review.
PPP Forgiveness Platform:
- The Procedural Notice includes detailed information about the secure PPP Forgiveness Platform that is only accessible to lenders. This PPP Forgiveness Platform will go live and begin accepting lender submissions on August 10, 2020, subject to extension if any new amendments to the forgiveness process make changes to the system necessary.
- This platform is where lenders will submit their forgiveness decisions, upload supporting documents from borrowers, and request forgiveness payments. It's also where lenders can check the status of a forgiveness request and respond to the SBA if there are any inquiries from the SBA.
- SBA reviews and remits funds to the lender, as applicable, within 90 days after the lender issues its decision to the SBA.
- Subject to any review of the loan or loan application, the SBA will remit the "appropriate" forgiveness amount to the lender, plus any interest accrued through the date of payment, no later than 90 days after the lender gives its decision to the SBA
- The lender must notify the borrower of the forgiveness amount paid by the SBA to the lender
If the forgiveness amount paid by the SBA to the lender is less than the amount in the forgiveness decision issued by the lender to the SBA, the lender must also notify the borrower of the amount in the lender's forgiveness decision.
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 loan's maturity.
If the SBA determines that a borrower was not eligible for a PPP loan or was not eligible for the loan amount or the forgiveness amount requested, the lender will request additional information from the borrower to provide to the SBA.
Borrowers may appeal the SBA's decision that the borrower was ineligible for the PPP loan in general or for the loan amount or loan forgiveness amount the borrower claimed. The SBA will be providing more guidance on this shortly.