Observations on Recent PPP Releases from SBA

08/11/2020

By Susan Sabo Financial Institutions Principal Charlotte, NC Email T. 704.816.8452

On August 4, 2020, the Small Business Administration (SBA) released FAQs on Paycheck Protection Program (PPP) Loan Forgiveness. The FAQs supplement the interim final rules issued earlier this year, which still left many lenders and borrowers uncertain about loan forgiveness calculations.

The FAQs contained three general items of interest for PPP Lenders:

  1. Sole proprietors, independent contractors, or self-employed individuals with no employees who did not include any employee salaries in the computation of average monthly payroll on their loan application automatically qualify to use the Form 3508EZ. Make sure those borrowers are aware of this guidance prior to completing their forgiveness application.
  2. When accepting a wet ink signature without in-person contact, lenders should take appropriate steps to ensure the proper party has executed the document. This is applicable when the borrower submits a scanned document rather than the signed original.
  3. When a borrower submits their loan forgiveness application within ten months of the end of the Covered Period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by SBA.

The rest of the FAQs focus on allowable expenses.  Those FAQs do not answer every remaining question facing borrowers as they complete their forgiveness applications or lenders as they review borrower applications, but do provide valuable insights on timing (incurred versus paid), certain allowable expenses (interest and transportation) and calculating a loan forgiveness reduction triggered by a salary or wage reduction greater than 25%.  A more detailed analysis of the FAQs can be found here.

Forgiveness Platform User Guide

On August 7, 2020, SBA released a Forgiveness Platform User Guide that outlines for lenders a variety of items regarding submission of PPP borrower forgiveness applications that are expected to begin on August 10, 2020.  With the late release of the guide, consider communicating with borrowers if you will not begin utilizing the platform on August 10, 2020.

The guide is divided into five sections and we note key information within each section.

Forgiveness Platform Overview

  • Officials of the lender should have received a welcome email for accessing the platform. If not, contact the SBA lender hotline at +1 (833) 572-0502 or email the SBA forgiveness inbox at PPPForgivenessRequests@SBA.gov.
  • The platform includes an Application Programming Interface (API) to allow for bulk uploads of forgiveness decisions.

Account Management

  • The Lender’s Authorizing Official (AO) can create up to ten additional users. Those users will be assigned one of four user types with varying permissions.
  • AOs need to input into the system if they are using simple or compound interest, as this will most likely facilitate a computation of interest due to the institution when a forgiveness decision is rendered. The AO also will enter details for where forgiveness payments are to be sent.

Submitting Forgiveness Decisions

  • Forgiveness decisions are only allowed for loans marked as fully disbursed in ETRAN.
  • The site includes an area for uploading documentation. Per this guide, the only documents required to be uploaded for the initial forgiveness decision are:

3508 Application

  • The forgiveness calculation form and the signed certifications
  • PPP Schedule A
  • Demographic information, if provided by the borrower

3508EZ Application

  • The form EZ and the signed certifications
  • Demographic information, if provided by the borrower
  • All other documentation provided to the lender is optional upon the initial forgiveness decision. Additional documentation must be provided in the event the SBA reviews the loan. It should be noted, although the SBA does not establish a dollar threshold for the documentation requirements in this guide, all loans over $2 million will be automatically reviewed. Therefore, institutions should upload all documentation received supporting their forgiveness decision for loans over $2 million.
  • For the upload, documents appear to be uploaded one at a time, i.e. the institution must identify the type of document they are uploading each time they upload.

Monitoring Forgiveness

  • Lenders will monitor the status of forgiveness decisions in this platform. A forgiveness request may be withdrawn, provided it is in the “Pending Validation Status”.
  • If a loan is selected for review, the SBA reviewer will request additional documentation through the platform. The lender must respond within five business days of notification. This response includes notifying the borrower in writing of the receipt of the notification and submitting request documents through the platform. Documents include, but may not be limited to:
    • The initial Borrower Application Form for the PPP loan and supporting documentation provided for the application
    • The Loan Forgiveness Application and all supporting documentation provided to the lender
    • The executed note
    • Payroll documentation
    • Nonpayroll documentation
  • Lenders are responsible for monitoring the status of their decisions and communicating to borrowers and the SBA in a timely manner.