For business owners who only received partial forgiveness on their Paycheck Protection Program loans, consider this your reprieve.
On January 27, 2022, the Small Business Administration, the agency responsible for administering the PPP, quietly issued a procedural notice outlining a new review policy for borrowers who have obtained a partial loan forgiveness decision from their lender, or have been instructed to request less forgiveness than they wanted.
As of January 27, if you wish to appeal a partial forgiveness decision, you will have 30 days (from receipt of the post-forgiveness notification from the lender) to notify the lender. The lender must then file a request for loan review on the borrower’s behalf within five days. The same process applies to borrowers whose lenders have blocked them from applying for full forgiveness.
The SBA is also asking lenders to notify borrowers who have received partial loan forgiveness that they, too, may request a PPP loan forgiveness review. They must notify the lender of their intentions within 30 days of receiving notification from the lender of this new policy. Again, if borrowers were asked to request less than the full value of their original loan, they are also eligible for a forgiveness review.
Previously, borrowers were required to appeal directly to the lender and such appeals would only be forwarded to the SBA after the borrower appealed. rejected twice. The SBA also randomly selects calls for review. These borrowers will go to the SBA’s Office of Hearings and Appeals (OHA), which employs attorneys to review cases.
The timing of these changes may seem strange, as borrowers have already requested a forgiveness of around 88% of the total value of PPP loans, which amounted to $790 billion when the program ended in May. However, in recent weeks, business owners have been increasingly vocal about rows with bankers over the forgiveness process. Some cited early confusion over what qualified as eligible salary, while others complained that lenders were dead wrong.
“We had to make multiple calls to the SBA expert,” says John Schweisberger, partner in charge of the business outsourcing services practice at Armanino, a San Ramon, Utah-based accounting and business consulting firm. California. “We had to walk [the lender] through the rules,” he said, noting that, in his experience, lender staff may have misapplied the program rules.
In one case, he noted that his client’s lender had incorrectly suggested that the company misappropriated PPP funds intended to pay employees who earned more than $100,000. In fact, employers were allowed to use PPP money to pay top earners, but only up to $100,000. Any salary above this amount was not eligible.
In the notice, the SBA acknowledges that borrowers had flooded the agency with complaints about their lenders’ forgiveness decision.
Last week, The interception reported that several Bank of America customers who only received a partial pardon had banded together and founded a support group on Facebook. Many founders expressed frustration with the review process at BofA, noting that they struggled to get people at the bank to return calls.
For its part, BofA says it is following the letter of the law. If a business owner, for example, included the salaries of 1,099 contractors in their original PPP loan calculation, then the bank cannot allow the business owner to get a discount for those funds. BofA spokesman Bill Halldin pointed to a procedural noticeissued by the SBA on January 15, 2021, expressly directing lending institutions to follow guidelines provided by the agency.
“Our goal has always been to help customers get the most repayment of their loan possible under existing SBA rules,” Halldin says. “We will notify borrowers who have received a partial forgiveness in the coming weeks and, if they choose to appeal within the 30-day deadline established by the SBA, we will help them.”
It is unclear how many loans will be reviewed by BofA. The institution would not provide details beyond the percentage of loans that had been submitted for forgiveness in 2020 and 2021. This represents 94% for 2020 and 87% for 2021. in billions. As of February 6, 2022, the SBA noted that of the total forgiveness amount of $696.5 billion requested by borrowers, $687.8 billion had been forgiven. In other words, the amount borrowers got was $8.6 billion less than they expected.
The SBA review process itself remains a wildcard. The SBA did not respond to Inc. request more information about the duration of an exam. But it’s still a reasonable question: if the agency is inundated with requests for review, can it handle them?
Bill Briggs, the former director of the SBA’s capital access office, said he was confident the agency could rise to the occasion — eventually. “The SBA has shown an ability to make operational adjustments during the PPP to streamline the process for borrowers and lenders. time to review all cases.”