New forgiveness rules, SBA PPP Direct Forgiveness Portal, and loan deferment

On July 28, 2021, the SBA announced a new interim final rule on PPP loan forgiveness. The guts of the IFR contain 3 important changes to the Paycheck Protection Program loan forgiveness process for loans of $150,000 or less: 

  1. The SBA has established a SBA PPP Direct Forgiveness Portal for borrowers—whose lenders choose to opt-in—as an alternative method of processing loan forgiveness applications. You can check to see if your lender has opted in to the SBA’s direct forgiveness platform by checking the SBA’s list of participating direct forgiveness lenders. You can also see the SBA’s webinar explaining how the direct forgiveness portal works
  2. The SBA is further streamlining the forgiveness process for second-draw PPP loans of $150,000 or less by allowing lenders in certain cases to use a new COVID Revenue Reduction Score (assigned by the SBA) at the time of forgiveness to document the required revenue reduction; and 
  3. The SBA is extending the loan deferment period for those PPP loans where the borrower has filed a timely appeal of a final SBA loan review decision with the SBA Office of Hearings and Appeals 

Let’s go over these three changes in more detail.

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Details on the SBA’s new “PPP Direct Forgiveness Portal”

First, the big news (for most PPP borrowers). The SBA has established an online PPP forgiveness platform called the SBA PPP Direct Forgiveness Portal. If your PPP loan was for $150,000 or less, AND if your lender has opted-in to the use of the platform, you will be able to submit your PPP loan forgiveness application online directly to the SBA, using the electronic equivalent of SBA Form 3508S.

According to the SBA press release, “Over 600 banks have opted in to direct forgiveness, enabling over 2.17mm borrowers to apply through the portal (This represents 30% of loans $150,000 or less that have not yet submitted for forgiveness).”

The platform’s portal began accepting online PPP forgiveness applications from qualified borrowers (whose lenders have opted-in) on August 4, 2021.

How does the new SBA PPP Direct Forgiveness Portal / platform work?

If your lender has opted-in to allow you to submit your PPP forgiveness application via the platform, and you have not already submitted a PPP forgiveness application via your lender, you will be given credentials to log in to the SBA PPP Direct Forgiveness Portal and submit your electronic PPP loan forgiveness application directly. Upon receipt of notice that you have applied for forgiveness through the platform, your lender will review the loan forgiveness application in the platform and issue a forgiveness decision to the SBA inside the platform.

Here’s the SBA’s recording of a training webinar for use of the direct forgiveness portal.

The SBA believes that lenders that opt-in to using the direct borrower forgiveness process will benefit from reduced costs, increased efficiency, and more timely remittance of forgiveness payments from the SBA, while borrowers will benefit from the ability to submit loan forgiveness applications directly through the platform and reduce the wait time and uncertainty associated with submission through their lender. 

How do I know if my lender has opted-in to the direct PPP forgiveness platform?

You can check to see if your lender has opted in to the SBA’s direct forgiveness platform by checking the SBA’s list of participating direct forgiveness lenders.

Please note: if you have already submitted a PPP loan forgiveness application to your lender, they will continue to process them as before. Do NOT submit a duplicate PPP loan forgiveness application to the SBA directly.

What are the details for use of the SBA direct borrower forgiveness process platform for my PPP loan?

The portal won’t be accepting applications until August 4, and that’s only for borrowers who used lenders that have opted-in to the SBA’s online PPP forgiveness platform. The SBA says: “Shortly after issuance of this rule, SBA will be issuing more detailed procedural guidance regarding (1) the process for lenders to opt-in to the direct borrower forgiveness process, (2) the process for borrowers with loans of $150,000 or less to access the Platform and submit their loan forgiveness applications directly through the Platform, and (3) the process for lenders to access the forgiveness applications in the Platform to perform reviews of their borrowers’ applications, issue forgiveness decisions to SBA, and request forgiveness payments from SBA. During the transition period after the launch of the direct borrower forgiveness process, lenders that opt-in will be expected to complete the processing of any loan forgiveness applications that have already been submitted by borrowers to the lender and should inform such borrowers not to submit a duplicate loan forgiveness application through the Platform.”

Under what circumstances should I submit my PPP forgiveness to my lender, rather than through the SBA’s online portal?

Per the SBA: “After the launch of the direct borrower forgiveness process, borrowers will continue to submit loan forgiveness applications to their lenders, rather than through the Platform, under the following circumstances: 

  • The PPP lender does not opt-in to use the direct borrower forgiveness process; 
  • The borrower’s PPP loan amount is greater than $150,000; 
  • The borrower does not agree with the data as provided by the SBA system of record, or cannot validate their identity in the Platform (for example, if there is an unreported change of ownership); or 
  • For any other reason where the Platform rejects the borrower’s submission. In such circumstances, borrowers must follow instructions from their lender regarding how the lender expects the borrower to submit a forgiveness application for its PPP loan

What is a COVID Revenue Reduction Score and does it apply to my PPP loan?

Please note: the COVID Revenue Reduction Score is used by your lender (as an option), and this portion of this interim final rule only applies to your loan if:

  1. You received a second draw PPP loan of $150,000 or less, and
  2. Your lender has not yet issued a loan forgiveness decision to the SBA, and
  3. You either didn’t submit documentation supporting a 25% revenue reduction at the time of loan application, or you submitted alternate documentation supporting a revenue reduction, but your lender hasn’t processed your forgiveness application yet

The COVID Revenue Reduction Score is a new figure assigned by SBA’s contractor and is an optional validation method that your lender may choose to use to approve your second draw PPP loan forgiveness application, rather than take the time to evaluate any submitted documentation supporting the required 25% revenue reduction.

To get the full story on the COVID Revenue Reduction Score, it’s necessary to get into the nitty gritty and cite the SBA’s new IFR:

“Among other things, to be eligible for a Second Draw PPP Loan, a PPP borrower is required to have experienced a revenue reduction of not less than 25% during one quarter of 2020 compared to the same quarter in 2019. Under section 7(a)(37)(I) of the Small Business Act, when a borrower applies for a Second Draw PPP Loan of $150,000 or less, the borrower can submit a certification that the borrower meets the revenue reduction standard, provided that on or before the date on which the borrower submits an application for loan forgiveness, the borrower produces adequate documentation that the borrower has met the revenue reduction standard. All Second Draw PPP Loan borrowers were required to certify on their loan applications (SBA Forms 2483-SD and 2483-SD-C) that they realized a reduction in gross receipts in excess of 25% relative to the relevant comparison time period. 

“The Second Draw PPP Loan IFR and the Loan Forgiveness and Loan Review IFR implementing the Economic Aid Act provide that if a borrower with a Second Draw PPP Loan of $150,000 or less did not produce documentation of revenue reduction at the time of application, the borrower must, on or before the date the borrower applies for loan forgiveness, submit to the lender documentation adequate to establish that the borrower experienced a revenue reduction of 25% or greater in 2020 relative to 2019, and such documentation may include relevant tax forms, including annual tax forms, or if relevant tax forms are not available, quarterly financial statements or bank statements. The rules also provide that where a borrower with a Second Draw PPP Loan of $150,000 or less does not provide documentation of revenue reduction with its loan application, the lender must perform a good faith review of the documents provided by the borrower at or before forgiveness, including the borrower’s calculations and supporting documents. To streamline forgiveness of Second Draw PPP Loans of $150,000 or less where the borrower did not submit documentation of revenue reduction at the time of the loan application, SBA has determined that an alternative form of revenue reduction confirmation is warranted to document the borrower’s revenue reduction.

“An independent third-party SBA contractor has developed a COVID Revenue Reduction Score (score) based on a variety of inputs including industry, geography, and business size. The score uses current data on economic recovery and return of businesses to operational status. Each Second Draw PPP Loan of $150,000 or less will be assigned a score, which will be maintained in the Platform and will be visible to lenders to use on an optional basis as an alternative to document revenue reduction. Additionally, the score will be visible to those borrowers that submit their loan forgiveness applications through the Platform using the direct borrower forgiveness process. When the score meets or exceeds the value required for validation of the borrower’s revenue reduction, use of the score will satisfy the requirement for the borrower to document revenue reduction. When the score does not meet the value required for validation of the borrower’s revenue reduction, and if the borrower has not already provided documentation to the lender that validates the borrower’s revenue reduction, the borrower must provide documentation either directly to the lender (for those lenders that do not opt-in to the direct borrower forgiveness process) or provide documentation to the lender by uploading it to the Platform.”

As far as what score qualifies your loan for full forgiveness, or the procedures for using the COVID Revenue Reduction Score, the SBA has only said that “Shortly after issuance of this rule, SBA will be providing additional guidance regarding the procedures for lenders and borrowers to use the COVID Revenue Reduction Score, including when a score meets or exceeds the value required for validation of the required reductions in gross receipts and thus is considered adequate documentation of the borrower’s revenue reduction.” 

We’ll update this article as details become available.

Bottom line: For SECOND DRAW PPP loans of $150,000 or less, where the borrower did not submit documentation of revenue reduction at the time of the loan application, If a borrower’s COVID Revenue Reduction Score in the Paycheck Protection Platform meets or exceeds the value required to validate the borrower’s revenue reduction, no additional documentation is required to be submitted by the borrower. This streamlines the review process for busy SBA-approved lenders and should reduce the workload and, hopefully, the length of time needed to receive PPP forgiveness approvals.

New: deferment extension for SBA OHA PPP forgiveness appeals 

Please note: This revision applies to you only if you have applied for PPP forgiveness and the SBA has rejected your request for forgiveness in whole or in part. 

Prior to this new IFA/rule, if you appealed the SBA’s decision to the Office of Hearings and Appeals, you may have still needed to begin making principal and interest payments on your loan, depending on how long it has been since your loan was funded. 

With this new IFA, the SBA is amending the appeals rule to, among other things, provide that a borrower’s timely appeal of a final SBA loan review decision will extend the deferment period for the PPP loan until SBA’s Office of Hearings and Appeals (OHA) issues a final decision on the appeal. Under the revised OHA rule borrowers will need to notify their lender of the appeal, so that the lender can extend the deferment period. 

Under the revised OHA rule, if you wish to appeal the SBA’s decision on your loan forgiveness, you must file a petition with the OHA within 30 calendar days of the time you received your final SBA loan review decision.

Bottom line: a borrower’s timely appeal of a final SBA loan review decision extends the deferment period on the PPP loan until the SBA’s Office of Hearings and Appeals issues a final decision on the appeal. So, you do not have to start making principal or interest payments on your PPP loan if you have submitted to the OHA an appeal of SBA’s decision within 30 days of receiving notice that SBA did not approve forgiveness of all or part of your loan.

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