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Paycheck Protection Program Forgiveness Process Outlined by SBA

Jul 28, 2020

A July 23, 2020 Small Business Administration (SBA) Procedural Notice outlines the process Paycheck Protection Program (PPP) lenders must use to review loan forgiveness applications.  The Notice also indicates lenders may begin submitting loan forgiveness decisions to SBA on August 10, 2020.

Dealerships with PPP loans should review the SBA notice with their lenders and, as necessary, with their accountant and/or attorney to ensure they are compliant with all necessary requirements.

The loan forgiveness process begins when a PPP borrower files a forgiveness application (or EZ forgiveness application) with its PPP lender. A PPP borrower may file its application after it has used all loan proceeds for which it seeks forgiveness. The best time to file a forgiveness application will reflect a careful consideration of several factors related to maximizing loan forgiveness and ensuring that all required supporting documents are available. PPP lenders must review forgiveness applications in accordance with specified procedures and must work with borrowers to resolve any errors or omissions they identify.

A PPP lender may approve an application in full or in part, deny it, or deny it pending SBA review and has 60 days to issue its decision to SBA. SBA has 90 days after it receives a complete, error-free forgiveness decision to remit any loan forgiveness to the lender. The lender must then notify the borrower of the forgiveness amount, indicating when the borrower’s first payment is due for any loan amount not forgiven.

A PPP borrower has 30 days to request its lender ask SBA to conduct a review of any denied forgiveness application. If SBA agrees to conduct such a review, it must notify the lender and the borrower of the outcome.

SBA may, at its discretion, decide to review any PPP loan to determine if a borrower was eligible to apply for a PPP loan, for the loan amount borrowed or for the forgiveness amount sought. SBA will notify the lender of any decision to conduct such a review, after which the lender has five days to both notify the borrower and to submit certain documents to SBA. SBA’s procedural notice does not set a deadline for the conduct of such reviews but does indicate that borrowers will have a right to appeal unfavorable outcomes.

Note: NADA has provided additional PPP loan forgiveness information on the NADA Coronavirus Hub, including Guidance on the Use and Forgiveness of PPP Loan Proceeds, a recent webinar and CARES Act FAQs.