PPP Loan Forgiveness Remains Confusing for Borrowers and Lenders

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Last week, SBA and Treasury announced a new, simpler application for Paycheck Protection Program (PPP) loan forgiveness for loans under $50,000. They also added information to the PPP’s FAQ section to clarify the deadline to apply for loan forgiveness, which is either two or five years from the loan origination date (depending on the maturity date of the loan).

These changes are meant to simplify and streamline the loan forgiveness process, a core element of the PPP legislation which allowed millions of small businesses to borrow much-needed cash to cover payroll and other essential expenses. However, multiple reports indicate that these modifications are a start but not enough to clear up the widespread confusion among both lenders and borrowers regarding the loan forgiveness process. 

The PPP entered its loan forgiveness phase in October, but most lenders are reluctant to begin accepting applications before receiving more clarity from Congress on certain aspects of the program, including how carefully they are meant to vet documents such as borrowers’ payroll records. Borrowers themselves are also unsure whether to apply for forgiveness now or wait to see if the government will automatically forgive loans under a certain amount – according to a new survey conducted by Fundera.

These loan forgiveness issues come on the heels of a National Bureau of Economic Research report that found no evidence that the first round of PPP funds flowed to areas more adversely affected by the economic effects of the pandemic or had a substantial effect on local economic outcomes like hours worked and small business revenues.