One of the more successful programs to come out of the federal government’s response to the coronavirus pandemic has been the U.S. Small Business Administration-run Paycheck Protection Program (PPP). Passed as part of the CARES Act, the PPP SBA loan program has been successful in providing billions of dollars to small businesses across the United States to help them weather the coronavirus pandemic. The paycheck protection program loans played a vital role in providing economic aid to small businesses, especially since so many businesses struggled to cover their payroll costs during the early stages of the pandemic. However, this does not mean the program has not faced a series of hurdles of its own. Early criticisms leveled at the program largely surrounded how unclear the forgiveness process for the program was. In response, the SBA and Congress have made a number of changes to the program since its initial inception. Recently, the SBA rolled out a series of new changes and adjustments to the PPP program and its forgiveness process, including a new SBA direct forgiveness portal. In this article, we’ll be covering the ins and outs of these new changes and what small businesses who took out a PPP loan can expect under the new changes to the PPP program.
Changes to the Paycheck Protection Program
There are a few key changes that have been made to the SBA program which small businesses should be aware of. They are as follows:
New Direct Forgiveness Portal
One of the biggest changes to the PPP program is the direct forgiveness portal that the SBA has opened. With this new online portal, small businesses that borrowed up to $150,000 can apply to the SBA directly to have their loans forgiven using the online portal.
Under the regular PPP loan forgiveness application process, borrowers must file for forgiveness through the lender that provided them with the PPP loan in the first place. These SBA-authorized PPP lenders are then responsible for submitting the proper paperwork and documentation to the SBA to obtain the forgiveness funds.
The new process as outlined by the SBA is designed to streamline this procedure with a universal online forgiveness platform. And since 93% of PPP borrowers have PPP loans of less than $150,000, the vast majority of PPP borrowers are eligible to use the new forgiveness platform.
How Does the PPP Direct Forgiveness Portal Work?
The new PPP direct forgiveness portal is fairly straightforward. Borrowers simply opt-in to using this new process as opposed to the original process outlined by the SBA (remember, this old process can still be used if you decide not to use the new direct forgiveness portal).
By using the portal, borrowers are able to submit what is the equivalent of Form 3508S – the form being used for forgiveness by borrowers with loans less than $150,000 – to their lenders. Once the form is submitted through the online portal system, lenders are then able to view the application and any additional documentation associated with it to render a decision on loan forgiveness.
As part of the direct forgiveness portal rollout, the SBA also released a 29-page walkthrough for borrowers to follow when using the new online PPP loan forgiveness portal. For additional assistance related to the PPP program and the direct forgiveness portal, borrowers can contact the SBA’s live customer service line for borrowers at 877-552-2692 or visit their direct forgiveness FAQ’s page.
Lenders are Still Responsible for Making the Loan Forgiveness Decision
One of the interesting aspects of the PPP program is that the responsibility for making loan forgiveness decisions has been passed onto the lenders. This has not changed with the introduction of the new portal. The SBA introduced the new portal with the singular objective of streamlining the loan forgiveness process and “providing a proven, user-friendly platform on which borrowers may submit their forgiveness applications and lenders will submit their forgiveness decisions.” Thus, lenders are still the party responsible for determining if a borrower is eligible for forgiveness as well as what portion of their loan amount qualifies for being forgiven.
Should You Submit through the New Portal if You Already Submitted a Forgiveness Application?
If you have already submitted a forgiveness application, the SBA is stated that they encourage you to NOT submit an additional forgiveness form through the portal. The old process still works and can still be used, so there is no reason to submit duplicate documentation to lenders by using the online forgiveness portal. In fact, doing so could cause confusion on the lender’s end and slow the forgiveness process down. There is no need to make the process more complicated than it already is and has been.
Do Borrowers Have to Use the Online Portal for PPP Forgiveness Now?
It is not necessary for borrowers to use the new online portal. The old processes for forgiveness as outlined by the SBA and your specific lender (the lender that provided you with the SBA loan) still work and can still be used. In fact, in order for you to be eligible to use the online portal, your lender has to have opted-in to using the new online portal beforehand.
Many larger lenders that have already outlined a streamlined and sophisticated forgiveness process for their borrowers have decided to not use the new online portal since it would overcomplicate their processes. In this situation, you should continue to use the original forgiveness process outlined by your lender and submit your application to them directly as opposed to via the new online portal.
In fact, the new online portal system is primarily designed to give smaller lenders a new streamlined process, something which smaller lenders have lacked the resources to do.
A Note for Biz2Credit Clients
While the new online portal system will be helpful for individuals who borrowed from smaller institutions and who are looking for an easy way to streamline the process, at Biz2Credit we still recommend using our own internal process for filing for forgiveness for those who borrowed through our system.
We understand that the new system might seem easier and more straightforward since the SBA has begun pushing for its use, however, like many other large lenders, we have developed our own internal processes. As such, using your Biz2Credit portal for submitting for forgiveness will make the process much faster in the long run.
Changes Surrounding Second Draw PPP Loans
The SBA also announced as part of their PPP Interim Final Rules a new COVID Revenue Reduction Score for individuals and businesses who obtained second draw PPP loans. If you recall, borrowers who took out loans of $150,000 or less were allowed to self-certify that their business had a 25% reduction in any calendar quarter of 2020 as compared to the corresponding quarter in 2019. This was a requirement for businesses that were seeking second draw loans.
Under the new COVID Revenue Reduction Score system, borrowers can use the scoring system to prove that they did indeed qualify for their second draw loan. The new scoring system was designed by a third-party contractor to take into account a series of inputs including factors such as industry, business size, and geography. If borrowers achieve a certain score, they will not have to provide additional documentation to substantiate a 25% reduction in revenue.
Please note, this COVID Revenue Reduction Score system can only be used by businesses for which their lender has not yet issued a final loan forgiveness decision to the SBA. If they have already issued a final decision, then you will not be eligible to utilize the new scoring system.
Deferment of Repayment Extension for Borrowers on Appeal
The SBA also extended the deferment period that borrowers can make use of for filing an appeal regarding their final SBA loan review decision. As of now, borrowers are able to apply to the SBA Office of Hearings and Appeals (OHA) to review their loan forgiveness decision. If a borrower files an appeal to the OHA, they will not be required to make any payments toward their PPP loan until they have received a final determination and decision from the OHA on whether or not they are eligible for forgiveness.
The changes to the SBA PPP program are just another round of changes in what has been a constantly evolving program. However, these rule changes look to have made the process a little bit easier for the thousands of small businesses that took out PPP loans during the pandemic.
As always, if you need assistance with your PPP loan, don’t hesitate to reach out to your provider or lender with questions. You should have been provided a loan officer or contact when you took out your loan, so they will be your number one resource for questions related to understanding your specific situation and loan. For assistance gathering paperwork and organizing finances, we suggest seeking out a certified public accountant (CPA) who is skilled in dealing with such matters. They’ll be able to assist you in putting together the proper documents for your loan, especially if you have to prove anything for PPP loan forgiveness, such as a 25% reduction in revenue.
At Biz2Credit, we continue to work hard each and every day to bring small businesses across the United States the latest timely and relevant information regarding the latest industry trends. So, please be sure to keep checking back here at our Biz2Credit Blog for the latest information!