SBA gives banks a break from forgiving PPP loans

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The Small Business Administration will allow borrowers with payroll protection loans of $ 150,000 or less to submit an online forgiveness application directly to the agency.

Lenders will have to agree to allow the SBA to process applications and they will still make a decision on whether to grant forgiveness under rule-making documents The agency released the industry environment. The agency did not say when the portal might open.

The initiative, which the SBA has touted as a way to start closing the program, which launched in April 2020, has been approved by banks, which still face the cost of processing applications from borrowers seeking forgiveness. During May, banks channeled nearly $ 800 billion in bad PPP loans to small businesses affected by the COVID-19 pandemic.

The Small Business Administration states that loans of $ 150,000 or less account for 93% of the outstanding debt under the Payroll Protection Program.

“As the Payroll Protection Program ends, the creation of a new SBA-based PPP forgiveness platform will allow more small businesses to focus their time and resources on successful reopening, as well as provide lenders with the opportunity to maintain control of their customer relationships,” said the consumer. This was announced on Wednesday by the CEO of the Bankers Association, Richard Hunt.

The SBA said in its rulemaking documents that since last summer it has received comments from borrowers and lenders saying that “the loan forgiveness process is huge and difficult to manage.”

“Despite the introduction of an optimized loan forgiveness application for borrowers with loans of $ 150,000 or less, many smaller PPP lenders continue to express concerns to the SBA that they do not have the technology or human resources to develop effective electronic loan forgiveness platforms. to process new ones, the application for loan forgiveness was simplified, ”it was reported.

Of the more than $ 521.1 billion in loans disbursed last year, the SBA said about $ 279 billion in loans were forgiven. Another $ 81.5 billion in loans is currently pending. No pardons have been made for nearly $ 160 billion in program loans.

According to the SBA, loans of $ 150,000 or less account for about 93% of outstanding PPP debt.

“The vast majority of businesses awaiting forgiveness have loans of up to $ 150,000,” said agency head Isabel Casillas Guzmán in a press release. “These entrepreneurs are preoccupied with their businesses and face an overly difficult process of forgiveness. We need to more effectively offer forgiveness so that they can return to revitalizing our main streets, sustaining our neighborhoods, and fueling our country’s economy. ”

Lenders limit the time they can accept forgiveness applications due to the 60-day window during which lenders are required to provide the SBA with a decision, according to regulation. Banks had it’s hard to stay in this window, especially for loans over USD 100,000.

This time, the delay created “uncertainty among borrowers that they will have to start making payments on their PPP loans while they wait for their lenders to accept and process their loan forgiveness applications,” the document says.

The new online portal aims to ease the volume of loans processed by banks.

Banks saw the cost of forgiving loans ate up the roughly $ 21 billion they received from PPPs, according to data analysis last year researchers at the University of Massachusetts Amherst.

The SBA also said Wednesday that it has hired an external contractor to develop revenue decline metrics that will help assess whether borrowers experienced the 25% drop in revenue required to participate in the second PPP draw.

If an estimate based on industry, geography, business size, and other data such as attendance and credit card spending does not meet a certain threshold, the borrower will be required to provide documentation to prove the decrease in income required for the second draw.



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