PPP Lenders Starting to See Payments from SBA

October 15, 2020
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PPP lenders getting payments

The payments to lenders for forgiven Paycheck Protection Program (PPP) loans are starting to flow.

Lenders using Abrigo’s PPP Forgiveness and Automation solution have had more than 4,000 loans totaling $126.8 million approved by the Small Business Administration (SBA) in the days since the SBA started remitting payments. That means all applications sent through Abrigo’s solution so far that have made it all the way through the SBA's decisioning process have been approved fully.

The flow of approvals is good news for community financial institutions that have been working since late March to provide $525 billion in funding to U.S. small businesses. Community financial institutions with less than $10 billion in assets had provided nearly half of all PPP funding by the time the program closed Aug. 8. Many of the banks and credit unions have been carrying the loans on their balance sheets since the PPP launched on April 3, and they’ll have to service any portion of loans that are not forgiven.

According to SBA guidance, lenders are responsible for notifying the borrower of the loan forgiveness amount remitted by SBA. If SBA determines that the full amount of the loan is eligible for forgiveness and remits the full amount of the loan to the lender, the lender must mark the PPP loan note as “paid in full” and report the status of the loan as ‘paid in full’ on the next monthly 1502 report filed by the lender.

If a PPP loan is not forgiven in full (for example, if the forgiven amount is reduced for an Economic Injury Disaster Loan, or EIDL, Advance), the lender must notify the borrower of the amount remitted by the SBA, as well as the due date for the borrower’s first loan payment. The lender must continue to service the loan.

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PPP lenders continue working with borrowers

Lenders are continuing to work with other borrowers to understand and apply for forgiveness, and they’re now incorporating the SBA’s newest alternative form: SBA Form 3508S for borrowers who received loans of $50,000 or less. The SBA and U.S. Treasury, using joint rulemaking authority, issued the new two-page, 16-question form last week. It exempts borrowers of less than $50,000 from penalties for reducing the number of full-time employees or salaries/wages and requires fewer calculations. Aside from filling out basic business contact information, borrowers on the form must provide:

  • Their PPP loan and PPP lender numbers
  • Loan amount
  • Number of employees at the time of the loan and at the time of the forgiveness application
  • Information about any EIDL Advance or application, and
  • The requested forgiveness amount.

Borrowers must submit documentation for payroll and nonpayroll expenses along with the Form 3508S – basically the same as for the Form 3508-EZ.

In guidance related to the new form, the SBA said lenders don’t need to verify reported information if the borrower submits documentation supporting the loan forgiveness request and attests that it accurately verified the payments for eligible costs. It reiterated previous guidance that lenders may rely on borrower representations, saying the lender “does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its request for loan forgiveness and attests that it accurately verified the payments for eligible costs.”

The SBA guidance acknowledged that in some cases, borrowers may submit to lenders documentation of eligible payroll and nonpayroll costs that exceed the amount of the PPP loan. In that case, the SBA said, "Whether a borrower submits SBA Form 3508, 3508EZ, 3508S, or lender’s equivalent form, a lender should confirm receipt of the documentation the borrower is required to submit to aid in verifying payroll and nonpayroll costs, and, if applicable (for SBA Form 3508, 3508EZ, or lender’s equivalent form), confirm the borrower’s calculations on the borrower’s Loan Forgiveness Application, up to the amount required to reach the requested Forgiveness Amount.

PPP forms’ expiration isn’t application deadline

In other recent SBA guidance, the agency clarified that while SBA forms expire Oct. 31, that is not a deadline for borrowers to apply for forgiveness. “Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination,” the SBA’s FAQs say. “However, if a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower’s loan forgiveness covered period, loan payments are no longer deferred and the borrower must begin making payments on the loan. For example, a borrower whose covered period ends on October 30, 2020 has until August 30, 2021 to apply for forgiveness before loan repayment begins.”

 

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