Borrower-friendly PPP loan forgiveness regulatory changes brought about by the new SBA regulation


The Small Business Administration (SBA) has just made a number of regulatory updates governing PPP loans that are well received by borrowers and their advisers. These new rules will save tens of thousands of hours for borrowers, accountants, banks and the SBA.

Please join Brandon Ketron, JD, CPA and myself on Saturday, August 7 at 10:00 a.m. EST for a free 30 minute webinar discussing the above as well as the recently published Advisory 2021-49 which provides guidance. on Employee Retention Credit and is discussed in our A Forbes article titled The Newly Issued Employee Retention Credit Guidelines Punish Employee Owners If They Have Living Family Members. The webinar can be registered by sending an email [email protected] with PPP in the subject line.

The main changes are as follows:

Simplified portal system for borrowers who received less than $ 150,000

Perhaps the most significant change was the much-anticipated opening of the online portal yesterday (August 4), where small businesses that have borrowed up to $ 150,000 can request the elimination of their loans. This portal aims to streamline the loan cancellation process, which is currently managed by the SBA through the respective individual lenders. These changes came into effect on July 28, 2021 (two days before the rules and regulations update).

The most important element of the new streamlined process is the alternate “opt-in” method of processing loan forgiveness requests. Currently, lenders are individually responsible for their own internal collection of loan cancellation requests, which they are then required to submit to the SBA for approval. This simplification will be available to those who have borrowed a total of $ 150,000 or less. Apparently 93% of PPP borrowers fall into this demographic, so that’s good news for a lot of small business owners.

By opting for the direct borrower remission process, all borrowers from a lender with loans of less than $ 150,000 or less will be able to submit the equivalent of Form 3508S on an online portal. Once this form is submitted, the lender will be able to review the application and submit a pardon decision to the SBA, all from the online portal.

Borrowers who have already submitted their rebate request on combined loans under $ 150,000 are encouraged not to submit duplicate requests through the new platform, and may complicate the process too much.

Borrowers should be aware that using the new streamlined platform is not mandatory. In fact, several large lenders with a better established infrastructure to handle the demand overload have yet to agree. In these cases, borrowers should continue to submit loan forgiveness requests directly to their lenders. The improvement is well supported by the thousands of small businesses struggling with the logistics of filing claims.

Many second-draw PPP borrowers will be able to ‘prove’ the required 25% reduction in income using a special scoring system.

The interim final rules also introduce the COVID Revenue Reduction Score, which is used at the time of surrender to document the revenue reduction required to qualify for second-draw PPP loans. In order to be eligible for a PPP Second Draw loan, the borrower must have had an income reduction of more than 25% for any calendar of 2020 compared to the same quarter in 2019.

Borrowers requesting loans below $ 150,000 were allowed to self-certify this income reduction requirement and were not required to submit any documents with their initial loan application until they were submitted prior to submission. receive the loan cancellation. Designed by an independent third-party contractor, the new COVID revenue reduction score takes into account a variety of inputs such as industry, geography and company size. If the total score meets the income reduction requirements, then the borrower will not be required to submit any additional documents and can rely on the Covid Income Reduction score to meet the income reduction requirement of 25. %, regardless of the company’s actual income.

This new COVID revenue reduction score can be used for “all second-draw PPP loans for which the lender has not yet issued a loan cancellation decision to the SBA as of the effective date of the provisional final rule ”.

Special postponement of repayment extension for borrowers on appeal

The new interim final rules also extend the loan deferral period for borrowers who file an appeal of an SBA loan review final decision with the SBA Office of Hearings and Appeals (OHA). If a borrower files a timely appeal against a final SBA loan review decision, the borrower will not be required to make payment on their PPP loan until a final decision on the appeal. be received from the OHA.

These changes follow another recent SBA update. As of October 2020, PPP borrowers with loans of $ 2 million or more must complete forms 3509 and 3510 of the Loan Necessity Questionnaire. This questionnaire included basic information, such as gross income, contact details, the effects of the COVID pandemic on businesses. operations and an assessment of the liquidity of borrowers’ finances. As of July 29, 2021, the SBA has removed the questionnaire forms.

This decision was based on the belief that government audit resources would be better spent in other areas. The questionnaires caused unnecessary delays for borrowers acting in good faith and subsequently damaged the value of the entire program. All PPP loans over $ 2,000,000 are audited by the SBA, so the Loan Necessity Questionnaire may still be helpful to large borrowers as it provides advice on questions the SBA may ask when doing so. of its examination, but is no longer mandatory. with loan forgiveness requests.

Hopefully, this will be a little relief for larger borrowers who would otherwise not have been affected by the new online portal.

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