Update on SBA 7(a) Loan Forgiveness & PPP

By Kathy Bazan, BRC Consultant

It appears politicians in DC may need calculators.

What Congress wanted was for everyone who was approved for the SBA’s 7(a), 504, and Microloan loans would get a certain number of monthly payments, interest, and fees forgiven. What Congress approved was $3.5 billion for this project.

According to the SBA, the $3.5B was not enough to cover all the months Congress wanted that money to cover because there were more borrowers eligible for the program than anticipated by Congress. Result? The SBA took the money they were given and divided it up so that everyone gets a few months of payments forgiven but not as many months as Congress wanted to cover.

Here is what the SBA stated on Feb. 16, 2021:

SBA has determined that the $3.5 billion that was appropriated to carry out Section 325 of the Economic Aid Act is insufficient to make the payments for the periods authorized by Section 1112(c)(1) of the CARES Act, as amended by Section 325 of the Economic Aid Act.

What this means in English:

 

Time Start Date for Applications Last Day to Apply or Get Funded What Congress Voted for: What Can Be Paid for with the $3.5B
SBA Loans applied for Pre-Pandemic   Loan Funded before 3/27/20 3 months of payments forgiven 2 months of payments forgiven
SBA Loans applied for Pre-Pandemic Hard Hit Businesses*   Loan Funded before  3/27/20 Additional 5 months Additional 3 months
Loans applied for Pre-Pandemic Community Advantage   Loan Funded before  3/27/20 8 months 5 months of payments forgiven
SBA Loans Applied for during the Pandemic 3/27/20 Disbursed by 9/27/20 6 months 6 months of payments forgiven
SBA Loans Applied for during the Pandemic SBA Loans 3/27/20 Disbursed after 9/28/20   3 months of payments forgiven
New SBA Loans 2/1/2021 9/30/21 6 months 3 months of payments forgiven

*Hard Hit businesses are those with NAICS codes starting with 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812.

“SBA will not begin to make the payments for this additional 3- month period until SBA provides to 7(a) Lenders and CDCs a list of their respective borrowers with each borrower’s assigned NAICS code” (2/16/21 SBA Notice).

Your tax return lists your NAICS code. Look it up. If this does NOT match your business, contact me. Let us see if we can get you reclassified. If you do not need it now, you might need to be in the right category for a future program.

If you have questions, ask me, or send an e-mail to John A. Miller at Section1112@sba.gov for more info.

Update on the PPP 2.0

  • As of last Friday, about 35% of all businesses in the U.S. have applied for financial assistance.
  • As of last week, only 25% of the PPP 2.0 funds have been used.
  • On average, it is taking 5 weeks from the day you submit your application to the day your loan funds.
  • If you applied previously and were given an E-Tran number, it is likely that your application was expedited, and you saw fewer issues processing your PPP 2.0.
  • If you are applying for the first time, you may encounter delays and issues.

Unforeseen obstacles might be an apt description of the PPP 2.0 program. Here are just a few of obstacles encountered which have slowed down loan processing:

  • If you applied for forgiveness of your PPP 1.0 that is still pending, your lender cannot upload your application for 2.0.
  • Lenders who submit PPP 2.0 applications through the portal are being hit with a high number of error messages which are incorrect. Yes, in English that means there was no error!
  • Issues involving how to demonstrate a 25% revenue reduction for the PPP 2.0 have not been resolved causing processing delays. It is these problems and several others which have necessitated pausing the program, stopping processing, and then restarting several times since January 11.

Important: the SBA’s system sent decline notices to SOME applicants which it should not have. Check back with your lender or with me. We might need to reach out to your U.S. Congressional representative to get your situation resolved favorably.

In other cases, after submitting the application, the applicant’s status flickered, which caused confusion. If this happened to you, reach out to me or your lender.

SBA assures us that they are trying to remediate any issues, and to approve, to fund, and to disburse funds as quickly as possible.

Planning for the future: the deadline to apply for PPP 2.0 is March 31. If you applied prior to deadline, your application would meander its way through processing.

(Since the money is not being depleted quickly, it is possible that the deadline might be extended BUT DO NOT count on this. Apply as soon as you can.)

Kathy Bazan, BRC Consultant to Business Owners
BRCConsultant@TualatinChamber.com
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