In April, businesses sought money. In August, they’ll be seeking forgiveness.On Aug. 10, the Small Business Administration will begin accepting applications for forgiveness of loans granted through the Paycheck Protection Program. The PPP, which was administered through the SBA, provided loans up to $10 million for businesses with less than 500 employees. About three months after the program was launched on April 3, more than $520 billion in loans had been awarded to businesses throughout the country.
What made the loans especially popular was the ability to have them forgiven, up to 100 percent, depending on how much of the funds were spent on payroll. In a few weeks, borrowers and their lenders will have to prove to the SBA that the loans were used as intended to get as much forgiveness as possible. “Give or take, we’ve got 13,000 of these,” said Chris Kneer, who runs the SBA lending program for Valley National Bank (NASDAQ: VLY). “It’s a long process, and we’ll likely be doing it well into next year.” Even with the launch of the forgiveness stage only a week and a half away, plenty of Tampa Bay lenders are still ironing out the details of their forgiveness process and awaiting further word from Washington, D.C. As has been the case for much of
the PPP, changes from Congress or the SBA can come suddenly, and lenders are hoping that legislators will make one major change before Aug. 10.
“We hope Congress will forgive all loans under $150,000 … that would take care of 80 to 85 percent of our loans,” said Jack Barrett, president of First Citrus Bank.
The move would certainly be a blessing for smaller, Tampa-based banks.
“That’s going to make the process for community banks much easier,” said Pilot Bank President Rita Lowman.
According to a report published in the Washington Business Journal on Tuesday, the latest version of the $1 trillion HEALSAct in the U.S. Senate calls for the forgiveness of all PPP loans under $150,000, although the proposed legislation said that affected borrowers must still “attest to a good faith effort to comply with Paycheck Protection Program loan requirements,
retain relevant records for three years, and may complete and submit demographic information.” It also says the SBA may review and audit these loans to ensure against fraud.
But in case the $150,000 exemption doesn’t go through — and for all those who received PPP loans greater than that amount — borrowers should start preparing their documentation, the lenders said.
“Make sure they have calculations ready to go and documentation is ready to upload and in good form,” said Chris Nichols, the chief strategy officer for CenterState Bank. “That’s regardless of the bank, because we’re all requiring the same things … think in terms of an audit. You need to prove payroll amount, show lease payments, health care expenses — you need to prove all that. The easier that’s done for us, the faster we can process the application.”
Even as banks are still pulling together their process for handling applications, some are offering assistance to borrowers in the run-up to Aug. 10. Tom Zernick, head of SBA lending for St. Petersburg’s First Home Bank, said that the bank’s portal offered an instructional video to walk clients through the application process. First Home Bank was one of the largest
providers of PPP loans in the Tampa Bay region.
“We think that will be helpful and eliminate a lot of concerns from the applicants,” he said.
Zernick said the banks would calculate the amount of forgiveness based on the documents provided by applicants, which would then be forwarded on to the SBA. There is an interim ruling providing a way for borrowers to appeal the SBA’s decision if they think they are entitled to greater forgiveness, he said.
Before starting the application, borrowers should look closely to see if they are eligible for a 3508ez form, said Kneer.
“There are two applications: the 3508, the standard forgiveness application, and the SBA also created what’s called 3508ez,” he said. “If you check certain boxes you can use that. It’s a shorter form that needs less information.”
Kneer said there are online forms that borrowers can practice filling out. He recommends taking as much time to prepare as possible.
“Don’t rush it, get ready, make sure you understand what you’re doing and the numbers are good,” Kneer said. “We review
applications and some of documentation, but weight is on the borrower to get that forgiveness number right.”
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