On Thursday, July 23rd, the Small Business Administration (SBA) issued a long-awaited procedural notice to Lenders announcing the SBA will begin accepting Payroll Protection Program (PPP) Loan Forgiveness Applications from Lenders on August 10th. The SBA also issued directives regarding the Lenders’ responsibilities for review, forgiveness recommendation, SBA submission and communication with borrowers.
The condensed version of this procedural notice for small business borrowers is – “get it right the first time!”
It will be very important for borrowers to submit forgiveness applications that are complete, accurate and well-organized in order to expedite the forgiveness process. This will avoid time consuming delays and requests for additional documentation resulting in unnecessary scrutiny by the Lender or the SBA.
The SBA reiterated that “Providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and Lenders may rely on borrower representations.” Additionally, the SBA further emphasized that it has the discretion “to review any PPP loan, of any size, at any time, at its discretion.
The following is a summary of what PPP borrowers should anticipate:
- Borrower will submit the Loan Forgiveness Application (SBA Form 3508, 3508EZ, or Lender equivalent) to its Lender (or the Lender servicing the loan).
- The Lender will confirm receipt of the borrower certifications along with confirming receipt of all documentation submitted to aid in verifying payroll and eligible nonpayroll costs.
- The Lender will confirm the borrower’s calculations and verify eligible expenses by reviewing the supporting documentation.
- If the Lender identifies errors in the borrower’s calculations or lack of supporting documents, the Lender is directed to work with the borrower to remedy the matter. A borrower will not receive forgiveness without providing acceptable supporting documentation.
- The Lender must complete the review of the application and issue a decision to SBA, along with the required documents, not later than 60 days after receipt of a complete.
- The Lender may issue one of the following forgiveness decisions:
- Approval in whole
- Approval in part
- Denial with prejudice pending SBA review of the loan
- If the Lender determines that the borrower is entitled to forgiveness of all or some of the amount applied for, the Lender will then issue its decision to the SBA and request payment from SBA at the same time.
- The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the Lender, plus any interest accrued through the date of payment, not later than 90 days after the Lender issues its decision to SBA.
- If applicable, SBA will deduct EIDL Advance amounts from the forgiveness amount remitted to the Lender as required.
- The Lender is responsible for notifying the borrower of the forgiveness amount paid by SBA to the Lender. If the forgiveness amount paid by SBA is less than the amount in the forgiveness decision issued by the Lender to SBA, the Lender must also notify the borrower of the adjusted amount.
- 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 maturity of the loan.
- If a Lender denies a borrower’s application in full, the Lender must notify the borrower in writing that the Lender has issued a decision to SBA denying the application. SBA reserves the right to review the Lender’s decision in its sole discretion.
- The borrower may notify the Lender that they are requesting SBA review of the Lender’s decision within 30 days of the written notice.
- Within 5 days of receipt of the borrower’s request for review, the Lender must notify SBA of the request.
- SBA will notify the Lender if SBA declines a request for review. If SBA accepts a borrower’s request for review, SBA will notify the borrower and the Lender.
It will be imperative for borrowers to be diligent in the preparation, completion and submission of the forgiveness applications. There will be a large volume of applications, meaning incomplete and incorrect applications risk long delays, higher scrutiny or even partial or full denial of forgiveness. Based on the SBA’s timeline, borrowers should expect up to 150 days from submission to forgiveness. This puts the earliest forgiveness notification at approximately November 29th.
Somerset is prepared to assist in the forgiveness application process. If you are a Somerset client, please contact your advisor directly. You may also contact us at . As always, we are here and ready to help.
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