On July 28, the Small Business Administration (SBA) published new guidance designed to simplify and streamline the forgiveness process for borrowers with Paycheck Protection Program (PPP) loans of $150,000 or less.
The new guidance has three components:
- The SBA announced that it will launch a new platform (website portal) on August 4 that will allow borrowers to apply for loan forgiveness directly with the SBA instead of having to go through their lender if their PPP lender opts-in to using the platform.
- The SBA introduced a COVID Revenue Reduction Score that can be used for second-draw PPP loans if the borrower did not submit documentation of required revenue reduction at the time of applying for forgiveness.
- The loan deferment period for PPP loans will be extended in cases where the borrower files a timely appeal of a final SBA loan review decision.
SBA Loan Forgiveness Platform
To address issues related to getting PPP loans forgiven in a timely manner the SBA is implementing a direct borrower forgiveness process that will allow borrowers to apply for their loan forgiveness directly to the SBA through a new portal set to launch on August 4.
When a PPP lender opts into the direct forgiveness process, the new portal will provide a single secure location that integrates with the SBA’s PPP platform and allows borrowers with loans of $150,000 or less to apply for loan forgiveness using an electronic equivalent of SBA Form 3508S. Upon receipt of notice that a borrower has applied for forgiveness through the platform, lenders will review the loan forgiveness application and issue a forgiveness decision to the SBA inside the platform.
One key to this is that the PPP lender needs to opt-in to using this process. Some lenders already have their own forgiveness platforms in place and may not want to use another platform to review loan forgiveness applications.
Additional procedural guidance will be issued soon that will lay out the process borrowers with loans of $150,000 or less will go through to access the platform and submit their loan forgiveness applications directly through the platform.
Borrowers should continue to submit loan forgiveness applications to their lenders, rather than through the platform, under the following circumstances:
- Their PPP lender does not opt-in to use the direct borrower forgiveness process;
- The borrower’s PPP loan is greater than $150,000;
- The borrower does not agree with the data as provided by the SBA system of record, or cannot validate their identity in the platform (for example, if there is an unreported change of ownership); or
- For any other reason where the platform rejects the borrower’s submission.
COVID Revenue Reduction Score
To be eligible for a second-draw PPP loan the borrower is required to have experienced a revenue reduction of not less than 25% during one quarter of 2020 compared to the same quarter in 2019. Borrowers have the option of submitting documentation to their lender supporting their drop in revenue at the time of applying for their second-draw PPP loan or at any point in time before applying for loan forgiveness.
To streamline forgiveness of second-draw PPP loans of $150,000 or less where the borrower has not yet provided revenue reduction documentation, the SBA will allow an alternative form of revenue reduction confirmation. Each second-draw PPP loan of $150,000 or less will be assigned a COVID Revenue Reduction Score. This score will be created by an independent third-party SBA contractor. It will be based upon a variety of inputs including industry, geography, business size, current economic recovery data, and return of businesses to operational status.
The score will be maintained in the SBA’s loan forgiveness platform. Lenders will be able to see this score and can use it as an alternative to document borrowers’ revenue reduction. The score will also be visible to borrowers that submit their loan forgiveness application through the direct forgiveness platform described above.
When the score meets or exceeds the value required for validation of the borrower’s revenue reduction, use of the score will satisfy the requirement for the borrower to document revenue reduction. When the score does not meet the value required for validation of the borrower’s revenue reduction, and if the borrower has not already provided documentation to the lender that validates the borrower’s revenue reduction, the borrower must provide documentation either directly to the lender (for those lenders that do not opt-in to the direct borrower forgiveness process) or provide documentation to the lender by uploading it to the platform.
Loan Deferment Extended
The current rule for appeals of final SBA loan review decisions on PPP loans provides that a PPP borrower must begin making payments of principal and interest on the remaining balance of its PPP loan when the SBA remits the loan forgiveness amount to the lender (or notifies the lender that no loan forgiveness is allowed), even if the PPP borrower appeals the SBA final loan review decision.
Now a borrower’s timely appeal of a final SBA loan review decision will extend the deferment period for the PPP loan until the SBA’s Office of Hearings and Appeals (OHA) issues a final decision on the appeal. The borrower should notify the lender of the appeal so the lender can extend the deferment period. The appeal petition must be filed with OHA within 30 calendar days after the appellant’s receipt of the final SBA loan review decision.
If you need guidance on the next steps for applying for PPP loan forgiveness, we encourage you to reach out to your trusted advisor or contact us at BerganKDV and one of our experienced team members can assist you with your tax planning needs.