As part of the CARES Act, the Small Business Administration (the “SBA”) was tasked with administering the Paycheck Protection Program (the “PPP”), which includes overseeing the loan application process and making final determinations regarding loan forgiveness. According to the SBA’s Interim Final Rule issued on January 19, 2021, and pursuant to the CARES Act, the SBA is required to issue a decision regarding a PPP borrower’s eligibility for loan forgiveness (the “Forgiveness Decision”) and remit the appropriate forgiveness amount to the lender “not later than 90 days after the lender issues its decision to SBA.” However, many lenders and borrowers have been waiting on Forgiveness Decisions for several months beyond this 90-day timeframe.
In March, the American Bankers Association (the “ABA”) issued a letter to the SBA on behalf of its member banks expressing its concern regarding the SBA’s delay, highlighting that “[t]he ensuing limbo is creating unnecessary strain for small businesses and preventing them from making necessary business decisions as they project their costs and expenditures for the remainder of this year and beyond.” A copy of the ABA’s letter can be found here.
In mid-April, members of Congress also issued a letter to the SBA expressing concern over the prolonged delay in Forgiveness Decisions and the impact such delay was having on thousands of small businesses across the country, saying “[t]he SBA’s delayed response only hinders future economic growth and undermines the purpose of PPP.” A copy of the letter from Congress can be found here.
As of late May, the SBA had approximately 145,000 PPP loans under review. Fortunately, this number has decreased from the 230,000 PPP loans that were under review in March, which could be an indication that the SBA’s workload is becoming more manageable. Indeed, some borrowers that submitted their forgiveness applications at the end of 2020 or in early 2021 have recently started receiving additional information requests from the SBA, which may provide those borrowers with some assurance that the SBA has finally started reviewing their forgiveness applications.
The biggest delay in Forgiveness Decisions is related to PPP loans over $2 million. Last month, the Associated General Contractors of America (“AGC”) filed a Freedom of Information Act request with the SBA requesting additional insight into the Forgiveness Decision review process for loans over $2 million, saying it has “anecdotal reports of applications for the forgiveness of loans over $2 million that have been pending since last September.”
While the SBA has acknowledged their inability to issue Forgiveness Decisions within the 90-day window, it has yet to provide additional information regarding a more realistic timeline. Having said that, within the last week, our firm has finally seen the SBA grant Forgiveness Decisions on some of our clients’ PPP loans in excess of $2 million. If nothing else, this is a positive indication for others with large PPP loans still waiting on the SBA.
The Business and Corporate attorneys at Dvorak Law Group have the knowledge and experience to efficiently assist clients with various business matters, including matters pertaining to the Paycheck Protection Program. Please contact Dvorak Law Group for specific questions and recommendations regarding your business.