The Small Business Administration will allow borrowers with Paycheck Protection Program loans of $150,000 or less to apply online for a rebate directly with the agency.
According to regulatory documents the agency issued to the industry on Wednesday. The portal will open on August 4, the SBA announced.
The initiative, which the SBA touted as a way to begin shutting down a program it launched in April 2020, has been welcomed by banks that still face the cost of processing applications from borrowers who want forgiveness. Through May, banks had funneled nearly $800 billion in repayable PPP loans to small businesses affected by the COVID-19 pandemic.
“As the Paycheck Protection Program winds down, the creation of a new SBA PPP Forgiveness Platform will allow more small businesses to focus their time and resources on a successful reopening, while providing lenders the choice to retain oversight of their customer relationships,” Consumer Bankers Association CEO Richard Hunt said in a statement Wednesday.
The SBA said in its regulatory filings that since last summer it has received feedback from borrowers and lenders that “the loan cancellation process is overwhelming and difficult to manage.”
“Despite implementing simplified application for loan forgiveness for borrowers with loans of $150,000 or less, many small PPP lenders continue to raise concerns with the SBA that they do not have the technology or human resources to develop effective electronic loan forgiveness platforms to process the new simplified loan forgiveness application,” the agency said.
Of the more than $521.1 billion in PPP loans issued last year, loans totaling about $279 billion were forgiven, according to SBA data. An additional $81.5 billion in loans are currently under consideration. Forgiveness applications have not been received for nearly $160 billion in program loans.
Loans of $150,000 or less account for about 93% of outstanding PPP debt, according to the SBA document.
“The vast majority of businesses awaiting forgiveness have loans below $150,000,” agency director Isabel Casillas Guzman said in a press release. “These entrepreneurs are busy running their businesses and are challenged by an overly complicated forgiveness process. We need to offer forgiveness more effectively so they can once again begin to animate our main streets, support our neighborhoods and fuel our nation’s economy.
Lenders have limited when they will accept forgiveness applications due to a 60-day window in which lenders must give a decision to the SBA, according to regulatory documents. The banks had a hard to stay in this windowespecially on loans over $100,000.
The lag has created “uncertainty among borrowers that they are going to have to start making payments on their PPP loans while they wait for their lenders to accept and process their loan forgiveness requests,” the agency said in the document.
The new online portal is designed to reduce the volume of loans banks handle.
According to a To analyse last year by researchers at the University of Massachusetts Amherst.
The SBA also said Wednesday it has hired an outside contractor to develop income reduction scores that will help assess whether borrowers have suffered a 25% drop in income, which is needed to qualify for a second PPP draw.
If the score, which will be based on industry, geography, business size and other data such as foot traffic and credit card spend, does not meet a certain threshold, the borrower will have to submit documents proving the reduction in income required for the second draw.