The Small Business Administration (SBA) and the Treasury Department on Thursday rolled out a simplified version of its forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less in an effort to ease the burden for lenders and small businesses.
Since the original 11-page application was released May 15, PPP participants have complained the forgiveness portion of the federal relief program is too onerous, and places significant resource constraints on banks and small businesses. Banking trade groups welcomed the new two-page form but continue their push for further action from Congress.
- "We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds," Treasury Secretary Steven Mnuchin said in a statement Thursday. "We continue to favor additional legislation to further simplify the forgiveness process."
The streamlined forgiveness process will affect 3.57 million of the 5.2 million loans originated under the program, which aimed to help small businesses weather the economic hardship brought on by the coronavirus pandemic, according to the SBA.
Approximately $62 billion of the $525 billion in PPP loans that have been issued total $50,000 or less, the SBA said.
"This will make a big difference for the industry overall, but it will vary by bank," said Bill Byrnes, a managing director who specializes in risk and compliance at Protiviti, a global consulting firm. "Effectively, this results in a more simplified process for lenders on over 68% of all loans originated.
"Lenders will still have a burden of potentially receiving up to 5.2 million requests that they have to process, but the level of work that needs to be done is significantly reduced for up to 3.57 million of those requests," he said.
The new guidance will affect half of PPP loans processed by First Resource Bank, a community bank that operates in Pennsylvania.
"In the early stages of PPP forgiveness, we have had borrowers sending us hundreds of pages of documentation to support their forgiveness application, which was total overkill," said Lauren Ranalli, First Resource Bank’s president and chief financial officer.
The simplified process will allow the bank to free up internal resources that have been allocated for PPP, in addition to aiding small businesses, Ranalli said.
"This will provide the much-needed assistance to the smallest borrowers to allow them to focus on running their businesses," she said. "This simplified process will help the SBA get through millions of PPP forgiveness applications that otherwise would have unnecessarily slowed down the process for all lenders and borrowers."
Trade groups credited the SBA for making the changes but called for further action from Congress.
Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey reiterated her organization's request for a higher automatic forgiveness threshold.
"To ensure small businesses and community banks can focus their resources on the economic recovery, Congress should immediately pass legislation to simplify forgiveness for loans of $150,000 or less," she said in a statement.
The Consumer Bankers Association (CBA) and Bank Policy Institute (BPI) called on Congress in June to pass legislation automatically forgiving PPP loans of $150,000 or less.
"This threshold would account for 85 percent of total PPP recipients, but less than 26 percent of PPP loan dollars," the groups wrote.
CBA President and CEO Richard Hunt said he appreciates the SBA’s new streamlined process but said the measure doesn't go far enough.
"[I]t is apparent Congressional action is needed for the true streamlined forgiveness mom-and-pop businesses need," he said.