The Small Business Administration says it has begun PPP loan forgiveness after some frustrating delays. The Paycheck Protection Program was introduced in April, and tens of thousands of small business owners have been waiting to have those loans forgiven. Banks say the process for converting loans into grants has been complicated, but the SBA says it now expects to move quickly on the approval and payoff of those loans.
The Wall Street Journal first reported the new development last week — that a Treasury Department spokesperson said that “the government expects to approve and pay forgiveness requests” during the first two weeks of October. (1) The SBA then issued a press release on October 8th confirming that loan forgiveness is underway. (2)
The SBA handed out $525 billion in potentially forgivable loans to 5.2 million small businesses. As part of the CARES Act, the loans could be forgiven if businesses kept employees on the payroll, and also requested forgiveness. That part of the program began in August.
So far, the SBA has received 96,000 requests, which represents 2% of all the PPP loans that were granted. So far, not one of the forgiveness applications has been approved. Kevin Kuhlman of the National Federation of Independent Business told the WSJ, “The ultimate success of the program will depend on forgiveness, so small-business owners are eager to learn of the decisions.”
The WSJ also reports that lawmakers in both the House and the Senate are pushing for legislation that would simplify PPP forgiveness. Businesses would only have to declare that the funds were used properly, for loans that are less than $150,000.
Jack Murphy of the Citizens Financial Group told the WSJ, “It is actually more complicated than any of us even thought. It’s taking us two weeks to process an application. Four to six contacts between small-business owners, and the folks that are trying to process the forgiveness applications.”
Treasury Secretary Steven Mnuchin said in the press release that the SBA and the Treasury Department have already made it easier for lenders to process forgiveness more quickly. He’s also announced a simpler loan forgiveness application for PPP loans that are less than $50,000. He said in the press release, “We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds. We continue to favor additional legislation to further simplify the forgiveness process.”
Unspent PPP Funds
There’s also another $130 billion available in unspent PPP funds. Those funds could be used for small businesses that are still struggling, but the deadline to apply for a PPP loan expired on August 8th. There’s now discussion about whether a second round of PPP loans should be offered as part of a new stimulus package. As you know, negotiations have stalled for months.
There is a separate resolution in the house that would extend the Paycheck Protection Program until the end of the year. That would make the unallocated PPP funds available for new loans. HR 9265 would also make it easier to get the loans forgiven. That’s also tied up in Congress.
In the meantime, the SBA says that forgiveness payments are going out to lenders and it will “continue to process all PPP forgiveness applications in an expeditious manner.”