As part of the coronavirus crisis aids for business, the US federal government signed a new stimulus package for business with a top-up of the paycheck protection program. From Wednesday, July 28, the Small Business Administration is expected to release details on its forthcoming forgiveness portal for the PPP. This means speedier decisions and caution for the remaining 7.8 million loans.
A series of forgiveness portal user guides for lenders was published ahead of release, and below me mention the main features to look forward to:
1. Direct Forgiveness
From the release of the forgiveness portal, borrowers with loans of $150,000 or less will be able to apply directly for forgiveness with the SBA, instead of doing it at their lender like they’re currently doing.
2. Portal improvements
SBA portal batch upload function will now also be available for lenders or their technological partners, to handle forgiveness submissions.
3. COVID-19 Health Index
From the release onwards, a COVID-19 health score determined by Dun and Bradstreet´s Commerce health index will be available for second-draw borrowers with loans of $150,000 or less. This score combines public and propriety data sources like foot traffic, and business to business expenditures. If a borrower’s score doesn’t jibe with reality, it would be necessary to upload documentation into the platform indicating revenue loss for 2020 year relative to 2019, amounted to at least 25%.
What’s in It for Lenders?
Lenders will need to both opt-in to use SBA portal and ultimately make the forgiveness decision for every loan on their books, even for borrowers that apply for forgiveness directly with the SBA. After 60 days of getting an application, lenders will have to make a forgiveness decision, and depending on its review, the SBA must then remit funds within 90 days. The borrower may need to provide additional verifying information in case there is any discrepancies. After that, they would be notified of their loan forgiveness amount. If there are any discrepancies, the borrower may need to provide additional verifying documentation. Lenders would then notify borrowers of their loan forgiveness amount.
By making forgiveness a lighter lift, the SBA could help free lenders up to make other loans and make more money with it. This makes being able to offload the smaller-dollar forgiveness applications appealing.
Until its open, the SBA has given lenders a guidance on how to set up their systems and API connections, but the waiting until the portal gets released could take up to 6 weeks. Furthermore, some lenders could choose not to sign up to the portal at all.
Better late than never
There are more than 4 million PPP loans that have already been forgiven, and to whom the portal did nothing to help. So, why did the SBA choose to launch the portal now and not sooner? It was to help more PPP recipients before they began repaying the loans that haven’t already been forgiven.
This delay on the portal release is deliberate and caused by the lack of resources to build a more complicated forgiveness portal from scratch. In the latest round of PPP, resources were destined to be funneled in the form of loans through lenders like community financial institutions.
These institutions focus on helping under-served business owners access capital, which was a goal during the latest PPP round.
This new tool offered by the SBA may be a way of taking more control over PPP processes, which are now in hands of lenders. In the past, throughout a series of tweets and communications, the SBA invited businesses to apply for loan forgiveness, but banks were not ready to process the applications. Also, the SBA wants to put forgiveness behind it, because the operational burden it means to have forgiveness done, and how much it costs to do them.