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Federal regulators simplify loan forgiveness for Payroll Protection Program

UPDATED: Wed., Oct. 14, 2020

Treasury Secretary Steven Mnuchin, right, and Jovita Carranza, administrator of the Small Business Administration, have jointly announced streamlined forms to allow small businesses to obtain forgiveness for loans through the Payroll Protection Program.  (Associated Press)
Treasury Secretary Steven Mnuchin, right, and Jovita Carranza, administrator of the Small Business Administration, have jointly announced streamlined forms to allow small businesses to obtain forgiveness for loans through the Payroll Protection Program. (Associated Press)
By Thomas Clouse The Spokesman-Review

Federal officials have rolled out streamlined requirements that simplify how small businesses apply for forgiveness of loan amounts of $50,000 or less that were approved for small businesses as part of the Payroll Protection Program.

The U.S. Small Business Administration, along with officials from the Treasury Department, released a three-page questionnaire late last week that should make it easier for businesses to answer the questions necessary to convert the loans into grants that will not have to be paid back.

Despite confusion and changing rules on the front end of the government-loans program, the new rules appear rather easy for business owners to follow, said Ezra Eckhardt, president and CEO of Spokane Teachers Credit Union.

“I think it looks fabulous,” Eckhardt said. “Well over 90 percent of our borrowers were below $50,000.”

Greg Deckard, president and CEO of State Bank Northwest, in Spokane, said the guidelines are a good first step but he was hoping for more. He noted that congressional leaders had been talking about giving blanket forgiveness for loans up to $150,000.

“It’s a step in the right direction. It’s still not perfect, but something we can go on,” he said. “But it needs to be higher. If you did it for $150,000, that would be 83% of all the loans we made.”

The delayed rules allowed federal officials to both make it easier for businesses to comply and ensure that taxpayer money was used as it was intended as part of the federal CARES Act, Treasury Secretary Steven Mnuchin said in a news release.

“We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds,” Mnuchin said. “We continue to favor additional legislation to further simplify the forgiveness process.”

The PPP was instituted to help businesses retain employees as the coronavirus pandemic caused widespread panic and economic shutdown. SBA Administrator Jovita Carranza called the $525 billion pumped through the program a “historic lifeline to America’s hurting small businesses.”

The new forgiveness guidelines demonstrate “our relentless commitment to using every tool in out toolbelt to help small businesses and the bank that have participated in this program,” Carranza said in the news release.

Eckhardt said STCU originated about 1,200 loans as part of the mad dash to get PPP funding.

“This is almost the inverse of the beginning,” Eckhardt said. “The first two weeks (of the PPP applications) were just pandemonium. It was a feeding frenzy.”

The SBA kept moving the bar on how long the businesses could use the money and for what. However, those same government officials have taken their time on the back end to simplify the paperwork each business must submit to qualify for forgiveness, Eckhardt said.

“We want to make sure we get the right information into the SBA for our borrowers so they get forgiveness the first time through,” he said.

As for STCU, Eckhardt said the financial institution will first process the businesses that obtained the larger loans before moving onto the vast majority of businesses that borrowed smaller amounts.

“We have just a couple handfuls of the larger loans. The ones that are more complex, we are making sure that we have all the information and communication with those borrowers first,” Eckhardt said. “On the smaller loans, there is less information to collect, so it should be much more straightforward.”

While the SBA has billions of dollars of loans to process, Eckhardt noted borrowers have about 10 months before deadlines are triggered.

“There is still lots of time,” he said. “I feel confident that people will be well taken care of as soon as we get into the forgiveness portion.”

Deckard, of State Bank Northwest, said his bank has dozens of applications already waiting for SBA forgiveness. He recently got word that his bank’s first loan has been forgiven. He said about half of the 451 PPP loans originated by his bank fall into the $50,000 or below category.

The new form “is an improvement, but there are still some challenges,” Deckard said. “I’m just disappointed that Treasury and Congress can’t get on the same page. This was supposed to be a program of loans of various sizes that were all supposed to be forgiven.”

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