SBA will directly handle PPP loan forgiveness so banks don’t have to

Small-business owners who received taxpayersubsidized Paycheck Protection Program loans of $150,000 or less will be able to seek forgiveness directly with the government through an online portal starting Aug. 4, allowing them to sidestep the private financial institutions that ran most aspects of the program for 14 months.

The policy change, conhas tained in a new regulation published Wednesday, was framed by the Small Business Administration as a way to quickly wind down the massive emergency program, which gave approximately $806 billion to millions of small businesses between April 2020 and June 2021.

The PPP loans were attractive to borrowers because they had an interest rate of just 1% and can be entirely forgiven at taxpayers’ expense. But the loan-forgiveness process been more difficult than many expected, leaving some small-business owners worried they will have to pay off an unexpected debt.

The vast majority of those waiting for forgiveness fall under the $150,000 threshold, according to the SBA. They are primarily sole proprietors or so-called microbusinesses that have just a few employees.

“This initiative will allow PPP borrowers to put their concerns of achieving full forgiveness behind them and focus on operating and growing their businesses again,” Patrick Kelley, associate administrator for SBA’s Office of Capital Access, said in a statement.

The Consumer Bankers Association, an industry trade group, said letting the government handle loanforgiveness applications would help banks and borrowers move on.

“The creation of a new PPP forgiveness platform from the SBA will allow more small businesses to focus their time and resources on successfully reopening, while also providing lenders the choice to retain oversight of their customer relationships,”

Consumer Bankers Association Chief Executive Officer Richard Hunt said in a statement.

The program relied on banks to manage most aspects of the loans with very little government intervention. This allowed it to move quickly — far outstripping a parallel government-run program — as financial institutions of all sorts quickly processed the loans and pocketed fees.

But the loan-forgiveness process has been much slower. In some cases, banks have been reluctant to accept loan-forgiveness applications because they are unsure they can process them within the required two-month window.