Starting this Monday, lenders can begin submitting their decisions on forgiveness of borrowers’ Paycheck Protection Program loans. The SBA has provided guidance on how to get this process started, but there’s still much more to come as the process unfolds.
Here’s what we know about The Process as well as the different types of Forgiveness Decisions you may encounter. We encourage you to share this information with business owners:
The forgiveness process will continue to develop and change. When the first round of guidance for forgiveness applications was released about two weeks ago, the SBA included the following highlights:
- —There are two applications for PPP loan forgiveness, and each has a set of instructions as well as its own forms to fill out. Guidance on which to choose can be found here.
- —Borrowers should read and follow the instructions, provide the corresponding applications and send it to the lender they worked with to receive the PPP loan.
- —The lender will evaluate the borrower’s application and either approve that the loan was utilized properly and is therefore eligible for forgiveness in whole… or categorize the loan as forgiven in part, denied or denied with prejudice. (More on those designations below.)
- —All lenders will use one platform to upload their forgiveness decisions starting August 10th.
- —These guidelines may be changed or updated by the SBA at any time.
Forgiveness Decisions & What They Mean
- —Full Forgiveness
The whole PPP loan amount has been approved for forgiveness. The borrower owes nothing.
- —Partial Forgiveness
Only part of the loan amount has been approved for forgiveness due to certain loan requirements not being met. (For instance, not enough loan money going to employee paychecks.) The borrower must repay part of the PPP loan. Note: Organizations that receive a Paycheck Protection Program forgivable loan and an EIDL Advance grant must deduct the EIDL Advance funding from the amount eligible for PPP loan forgiveness.
- —Forgiveness Denied
The entire PPP loan amount has not been approved for forgiveness. The business owner must repay it. The borrower may submit a request for SBA review of the lender’s decision. The SBA may accept or decline that request for a review.
- —Forgiveness Denied with Prejudice
This does not mean you will ultimately be denied. It means that your application for loan forgiveness is under review.
May a borrower appeal the SBA’s determination that the borrower is ineligible for the PPP loan amount or the loan forgiveness amount claimed by the borrower? In short: Yes. The SBA says it plans to issue an interim final rule addressing this process shortly. We’ll keep tabs on it and keep you updated as these developments continually unfold.