PPP Loan Forgiveness Could Begin This Week

PPP loan forgiveness has been a major worry for many franchisees since the first round of federal funding became available. In fact, some business owners chose not to take money they had been awarded for fear of incurring more debt if they misinterpreted the program's guidelines.

The Payment Protection Program Flexibility Act, which President Donald Trump signed into law in June, eased some of these fears. The initiative shrunk the percentage of PPP funds business owners were required to spend on payroll from 75% to 60% and extended the time period to use the funds threefold, from eight weeks to 24 weeks. Business owners also have five years to pay back their loan at one-percent interest if they don't qualify for forgiveness. 

Today the Treasury Department announced that it expects to begin approving and paying out forgiveness requests for Paycheck Protection Program (PPP) applicants as soon as late this week.

According to The Wall Street Journal, The Small Business Administration (SBA) has received more than 96,000 PPP loan forgiveness applications since that portal opened August 10, but has approved none, William Manger, the agency's chief of staff, told House lawmakers last week.

"We've submitted a number of applications," John Buhrmaster, president and CEO of Scotia, N.Y.-based 1st National Bank of Scotia, told American Banker. "We're four to six weeks into this, and we have not heard one word back."

Some banks find the forgiveness process too complex and time-consuming. That is why many of the nation's largest banks have indicated they are waiting to see if new guidance or legislation will streamline the forgiveness process. They also want to see if Congress will pass legislation providing automatic forgiveness for loans of $150,000 or less.

Treasury Secretary Steven Mnuchin told a Senate panel last week he would support simplified forgiveness, but legislation is needed. 

The latest PPP plan, couched in a stimulus bill introduced by House Democrats, would automatically forgive loans of $50,000 or less and offer a simplified forgiveness application for loans between $50,000 and $150,000. The proposed COVID-19 relief bill also includes $120 billion in funding to help restaurants specifically.

Meanwhile, 10 trade groups, including the American Bankers Association (ABA), the Credit Union National Association, the Independent Community Bankers of America and the Bank Policy Institute, have written a letter urging Senate and House leaders to pass a measure reauthorizing PPP funding. The program closed to new applications August 8, leaving $130 billion unallocated.

About 84% of borrowers surveyed last month by the National Federation of Independent Business said they have used all of the PPP funds they were given. About 44% said they would apply for a second PPP loan if one were allowed.

"As these businesses continue to recover, they will need additional resources to maintain business operations, and the PPP remains the most efficient and effective means to assist them through this challenging period," the groups wrote.

While lawmakers have sporadically proposed several initiatives to restart the program — including some that would allow some businesses to get a second loan — none has taken hold.