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The Paycheck Protection Program (PPP) was implemented to provide financial relief to U.S. businesses during the COVID-19 pandemic. According to the latest data from PandemicOversight.gov, there were a total of 11.5 million PPP loans issued, of which 10.5 million were fully or partially forgiven with an average forgiveness amount of $72,100.
What happens if your business received less forgiveness than expected – or none at all – on your PPP loan? This article outlines your options.
1) SBA Review of Partial PPP Loan Forgiveness
On January 27, 2022, the Small Business Administration (SBA) issued a Procedural Notice outlining a new process that allows PPP borrowers to request an SBA loan review if their PPP lender issued a partial approval forgiveness decision.
If you (the borrower) received a partial approval decision from your lender or servicer that you disagree with, or if your lender or servicer required you to apply for forgiveness in an amount lower than what you believe was warranted, you may request an SBA review of your loan.
In order to qualify for a review, borrowers must submit a request through their lender or servicer within 30 calendar days after being notified of the SBA’s decision on their loan forgiveness application. Lenders and services have been notifying eligible borrowers whose applications for partial forgiveness were previously approved by the SBA. These borrowers can then submit an SBA review request within 30 calendar days of receiving this notification from their lender or servicer.
2) SBA Appeals Process for PPP Loans
The partial forgiveness review process supplements the SBA appeals process (formalized on September 16, 2021) which gives borrowers the right to appeal:
Borrowers must file their formal appeals directly with the SBA’s Office of Hearings and Appeals within 30 calendar days after being notified of the SBA’s decision on their PPP loan forgiveness application.
3) Request for Adjustment
PPP borrowers that submitted applications for less loan forgiveness than was warranted due to reasons such as 1) clerical error or 2) reducing the requested forgiveness amount by the amount of an EIDL advance, may request that their lender or servicer submit a Request for Adjustment to the SBA on their behalf. Currently, there is no deadline for submitting this request.
4) Repay PPP Loan Over Remaining Term
If you do not receive full forgiveness of your PPP loan, you will be required to repay the remaining or full loan amount plus interest over the term of the loan. Borrowers are required to make at least monthly payments of principal and interest, but you are allowed to pay off the entire balance at any time without prepayment penalty.
The term for a PPP loan begins on the date the loan was funded, but the date you have to start making payments on the loan depends on your deferral period – during which payment is not yet required on your PPP loan.
If you didn’t apply for forgiveness, the deferral period is approximately 15 ½ months. The remaining term for a two-year loan would be approximately 8 ½ months and for a five-year loan would be approximately 44 ½ months. If you have not applied for loan forgiveness by the end date of the deferral period, you are required to begin making monthly payments.
If you did apply for forgiveness, there are two potential situations:
If you do not receive full forgiveness of your PPP loan and fail to make payments, your lender or servicer is required to notify the SBA once you become 60 days delinquent. After this notification, the SBA will make a note in their system of the business’ default and may then refer the loan to the U.S. Treasury for collection.
What Should I Do Next?
If you aren’t sure which option is right for you, reach out to your lender or servicer for help. If NEWITY services your PPP loan, we are happy to assist you. If you have not started the forgiveness process, you can log into the Portal to submit your forgiveness application. If you submitted your forgiveness application and have questions, please contact us.