PPP Loan Forgiveness: Will Election Bring New Rules?
YOUNGSTOWN, Ohio – The U.S. Small Business Administration has started to forgive loans in the Great Lakes region for businesses that received assistance through the federal government’s Paycheck Protection Program earlier this year.
“We have forgiven a number of loans,” Rob Scott, the SBA’s Great Lakes Regional Administrator, told reporters on a conference call Thursday. He said it’s too early to quantify precisely how many PPP forgiveness applications have been approved so far, but concrete numbers should be available by early November.
The SBA’s Great Lakes Region includes Ohio, Michigan and Indiana.
Businesses across the country were shut down early last spring because of the Covid-19 pandemic. In March, Congress passed the Coronavirus, Aid, Relief, and Economic Security Act, which allocated more than $2 trillion in stimulus money to offset the impact to the economy.
Among the provisions in the Cares Act is the PPP, which authorized up to $659 billion to small businesses imperiled by the virus.
“The SBA has mobilized probably the greatest public-private disaster response in modern history,” Scott said.
Meanwhile, the SBA is working closely with PPP program lenders to identify any issues with forgiveness applications that need corrected. Lenders, not the businesses directly, submit the applications to the SBA.
Most of the issues thus far are related to simple clerical errors, Scott said. “A lot of times we’ve heard things like a decimal point is in the wrong area, so we’re catching things like typographical errors,” he said.
Scott added that lenders have been quick to correct any mistakes and resubmit the applications.
He said additional help for applicants could be found at www.sba.gov/recovery, while program partners such as small business centers, veteran’s business outreach centers, Score, and women’s business centers are available to help applicants with questions.
On Oct. 8, the SBA and the U.S. Treasury Department issued simplified forgiveness application forms for those businesses that received loans under $50,000, which constitutes about 70% of the total PPP loans awarded across the country, Scott said. The application is a single page and takes about 15 minutes to complete, he said.
Still, every business is required to document that the loan money was spent on eligible expenses, Scott noted, such as payroll, rent, mortgage, or utility payments.
For example, 60% of a loan that a business receives under the PPP program is supposed to cover payroll retention, Scott said. Should the business fail to report that this money was used to support its payroll, it would have to repay that portion of the loan.
About $138 billion remains in the PPP program, Scott said. “We remain focused on the survival of our nation’s nearly 32 million small businesses as we navigate and come out of this pandemic,” he said.
The SBA began the forgiveness process on PPP loans Oct. 4, Scott said.
However, many potential applicants have taken a ‘wait and see’ approach before submitting their claims in the event Congress changes the rules. Many lenders, for example, are pressing for simplified applications for those who received loans of $150,000 or less instead of $50,000.
“Should Congress make any changes to the forgiveness process, the SBA will act on any legislation as it is signed into law by President Trump,” he said.
As for additional relief, Scott said President Trump is ready to move forward with a large stimulus plan to support small businesses but there’s no consensus in Congress. Complicating matters is the upcoming presidential election, now less than a week away.
“If President Trump is re-elected, I think we’ll continue to do the economic recovery programs that he has championed and hopefully Congress will get behind it,” he said.
Should Democrat Joe Biden win Nov. 3, it could stall action in Congress during the lame-duck period as the country awaits a transition of power.
“We’ll be at a standstill as an agency,” he said. “Small businesses need help now. President Trump has laid out a lot of items he wanted to do and Congress has not acted on them.”
Copyright 2020 The Business Journal, Youngstown, Ohio.