SBA Notice Outlines Borrower’s Role In PPP Loan Forgiveness

The U.S. Small Business Administration (SBA) has issued a procedural notice to lenders regarding the forgiveness of Paycheck Protection Program (PPP) loans. The notice confirms that the borrower is responsible for preparing the forgiveness application and for submitting it to the lender that is servicing the loan. It is also the borrower’s responsibility to calculate the PPP loan forgiveness amount.

The lender is expected to perform a good‐faith review of the application within a reasonable time. If the lender identifies errors or omissions, the lender is expected to work with the borrower to remedy the situation before the application for forgiveness is submitted to the SBA. “The borrower shall not receive forgiveness without submitting all required documentation to the lender.”

According to the notice, the lender “must complete the review of the application and issue a decision to SBA, along with the required documents, not later than 60 days after receipt of a complete application from the borrower.”

A lender’s decision may be in the form of: (1) approval (in whole or in part); (2) denial; or if directed by SBA, (3) a denial without prejudice due to a pending SBA review of the loan in question. If the lender determines that the borrower is entitled to forgiveness of some or all of the amount applied for under the PPP loan program, the lender must request payment from SBA at the time the lender issues its decision to SBA. The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to the SBA. If the borrower also received an Economic Injury Disaster Loan (EIDL) advance, the SBA will deduct the EIDL advance amounts from the forgiveness amount remitted to the lender as required by the CARES Act. If any PPP loan amount is not forgiven, the borrower will be expected to begin monthly payments of principal and interest over an 18‐month period, per the CARES Act.

If a lender denies a borrower’s application in full, the lender must notify the borrower of the decision, and the SBA may review the lender’s decision. Within 30 days of notice of denial from the lender, the borrower may notify the lender that it is requesting that the SBA review the lender’s decision. Within five days of receipt of the borrower’s request for SBA review, the lender must notify the SBA of the request, according to the notice. The SBA will notify the lender if SBA declines a request for review, and if the SBA accepts a borrower’s request for review, the SBA will notify the borrower and the lender of the results of the review.

In a statement issued by the SBA on April 28, the SBA indicated it intends to review PPP loans in excess of $2 million. However, the SBA may, and has discretion to, review a PPP loan of any size for eligibility, forgiveness amount and otherwise.

On August 10, the SBA plans to launch an online platform for lenders to use to accept loan forgiveness decisions, supporting documentation and requests for forgiveness payments. The PPP Forgiveness Platform is expected to be available only to PPP lenders, not PPP borrowers.

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