Details on Reviews for PPP Partial Forgiveness
On January 27, 2022, the Small Business Administration (SBA) released a Procedural Notice outlining a new process allowing Paycheck Protection Program (PPP) borrowers to request an SBA loan review of a lender’s partial approval forgiveness decision. Currently, the SBA’s Office of Hearings and Appeals (OHA) allows borrowers to appeal certain SBA loan review decisions. However, when a lender issues a partial approval forgiveness decision, the borrower does not have a right to appeal to the OHA unless SBA selects the loan for an SBA loan review and issues an appealable final SBA loan review decision. For purposes of the Notice, a partial approval forgiveness decision includes a lender issuing a partial approval to the SBA on a borrower’s loan forgiveness application or the lender required the borrower to apply for forgiveness in an amount less than the full amount of the PPP loan.
The SBA has now decided to allow borrowers with a partial approval decision from their lender that they disagree with to request an SBA loan review.
Beginning immediately, when a lender receives an SBA forgiveness remittance on a partial approval decision, the lender must inform the borrower that the borrower has 30 calendar days to seek, through the lender, an SBA review of the decision. Within five calendar days of a lender’s receipt of a borrower’s timely request for an SBA loan review, the lender must notify the SBA and include a copy of the lender’s original notice of the reason for the partial approval decision.
For previously issued partial forgiveness decisions, lenders have 30 calendar days (February 25, 2022) to notify a borrower that they have 30 calendar days from the lender’s notification to request an SBA review of the forgiveness decision. If the borrower requests a loan review, the lender has five calendar days to notify the SBA and must include a copy of the lender’s prior notice of the reason for the partial approval decision.
The SBA reserves the right to review the lender’s decision at its sole discretion. If the loan is selected for SBA review, the loan is not deferred and the borrower must continue to make payments on the remaining loan balance. The fact that a borrower has requested the new review process does not ensure that the SBA will actually review the lender decision.
If a loan is selected for SBA review, the lender will be notified. SBA can review borrower eligibility, PPP loan amounts and use of proceeds, and loan forgiveness amounts. This is an important consideration before a borrower requests the SBA review of the lender decision. It is possible that the amount of the forgiveness could actually be reduced as a result of the review. The SBA can make the following decisions:
- A forgiveness amount greater than the lender decided. If full forgiveness is approved, the lender must refund all borrower payments. If the review results in a higher forgiveness amount, but less than full forgiveness, the lender must re-amortize the PPP loan and refund any excess borrower payments.
- A forgiveness amount the same amount as the lender decided.
- A forgiveness amount less than what the lender decided (including zero if, for example, the borrower is determined to be ineligible for the PPP loan).
Lender Communication with Borrowers
Lenders are encouraged to work with borrowers that have requested an SBA loan review of a partial approval decision to see if the borrower and the lender can resolve the issue. If, as a result of this process, the lender determines the borrower is entitled to forgiveness in an amount that exceeds the amount requested in the borrower’s original forgiveness application, the lender must obtain from the borrower a signed corrected PPP Loan Forgiveness Application and any required supporting documentation. The lender can then submit a forgiveness payment correction request to the SBA. The correction request must include the signed corrected forgiveness application and supporting documentation and an explanation of the lender’s reasons for requesting the forgiveness payment correction.
The SBA will review the correction request and determine, at the SBA’s sole discretion, whether to grant the request.
If you have questions about these changes, contact your BKD Trusted Advisor™ today.