On July 23, 2020, the Small Business Administration (SBA) issued a procedural notice to lenders participating in the Paycheck Protection Program (PPP) concerning the loan forgiveness application process. The notice informs lenders that beginning August 10, 2020, they may begin submitting forgiveness applications through an online platform. The notice states that the SBA intends to post a link to the platform on its website as well as to provide lenders with instructions for using the portal via email.
Borrowers should take note that it remains their responsibility to accurately calculate the forgiveness amount. The notice reinforces that it is the lender’s responsibility to “perform a good-faith review, in a reasonable time, of the borrowers’ calculations and supporting documents.” Additionally, the lender is required to work with borrowers to resolve any errors or other issues it identifies prior to submitting the application to the SBA. Once the application is finalized, it must be submitted by the lender to the SBA, along with certain required certifications and supporting documentation as well as the lender’s decision to approve, in whole or in part, or deny the application. A lender must complete its review of an application and issue a decision to the SBA, along with required documentation, within 60 days of a borrower’s submission of a complete application.
Once the application is submitted to the SBA, the SBA has 90 days to process the application and remit the applicable forgiveness amount, with interest through the date of payment, to the lender. It is the lender’s responsibility to notify borrowers of the forgiveness amount paid by the SBA to the lender. This responsibility includes informing borrowers of instances in which the amount paid by the SBA is less than the forgiveness amount determined by the lender in its submission to the SBA. In circumstance where the forgiveness request is denied or only a portion of the loan is forgiven, the borrower is responsible for repaying the remaining balance on or before the maturity date of the loan.
In the event of a lender’s denial of a borrower’s forgiveness application in full, the lender must provide written notice to the borrower that it has issued a decision to the SBA denying the application. The SBA reserves the right, in its sole discretion, to review the lender’s decision. A borrower may request that the SBA review the lender’s decision by notifying the lender of such request within 30 days of notice of the lender’s decision. The lender must notify the SBA of the borrower’s request within 5 days of its receipt of the borrower’s request for review. In the event such request is denied, the SBA will notify the lender only. However, where the SBA accepts a borrower’s request for review, it will notify both the borrower and the lender of the results.
FLB’s attorneys have extensive experience in all matters relating to PPP and the CARES Act. We are here to provide guidance to businesses and business owners facing the unique issues brought about by the COVID-19 pandemic, including loan forgiveness.