Lenders – Are You Ready for PPP, Part 2: Forgiveness?

Pam Roman

Within just a few weeks, many lenders faced a hurricane of anxious customers and their paperwork for Paycheck Protection Program (PPP) loans. It may feel like we’re now in the calm eye of that hurricane, but it’s not over. The back end of the same hurricane is fast approaching in the form of PPP loan forgiveness. Often where a hurricane goes next is unpredictable, and so it is with PPP forgiveness. For you lenders out there, let’s cover what we know.

How do my customers apply for PPP loan forgiveness?

After the initial May release of a complicated, calculation-rich form, the SBA subsequently issued what they described as a “revised, borrower-friendly Paycheck Protection Program (PPP) loan forgiveness application.” This was in response to mandates in the Paycheck Protection Program Flexibility Act (PPPFA) passed in early June. The revision took the original forgiveness application from 11 pages down to five. You can find the revised SBA form here.

In addition, the SBA also published a new “EZ version” of the forgiveness application – just three pages – that applies to certain borrowers under specific circumstances. The EZ application requires fewer calculations and less documentation for eligible borrowers – you can find it here.

According to the SBA, “These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.”

What will be forgiven?

To perhaps over-simplify, if business owners spend at least 60 percent of the loan on payroll costs within 24 weeks of receiving the loan, the whole loan will be forgiven. (The owner should spend the remaining percentage on mortgage, rent and/or utilities.) The 24-week period can’t extend beyond Dec. 31, 2020. The PPPFA changed these numbers from 75 percent and eight weeks, with the express purpose of making forgiveness more accessible. If a business owner misses the 60 percent mark, they can still get a portion of the loan forgiven – it’s not an all-or-nothing calculation.

24 is better than eight.

Both new applications give the option of using the original 8-week period (for loans before June 5, 2020) or an extended 24-week period. This should help spread out the forgiveness application crunch. But you should encourage your customers to apply once that 60 percent is reached – and not wait for the 24 weeks. Most businesses would want the debt gone as soon as possible.

Remember – PPP money is still available.

According to the SBA, PPP provided “4.5 million small business loans totaling more than $500 billion to ensure that approximately 50 million hardworking Americans stay connected to their jobs.” There is still about $130 billion available. But hurry – August 8 is now the new deadline for all PPP loan approvals.

Prolifics can help.

Our PPP Digital Loan Officer, Archie, can help you and your customers by processing new PPP loans in two minutes. And, when your customers look to have their loans forgiven, Archie can help you again – he understands the loan forgiveness eligibility rules and process. Visit Archie or email us at solutions@prolifics.com.