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Financial Services Law Insights and Observations

SBA simplifies PPP forgiveness for loans under $50K

Federal Issues SBA Covid-19 CARES Act Department of Treasury

Federal Issues

On October 8, the Small Business Administration (SBA), in consultation with the U.S. Treasury Department, announced a more streamlined loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less. According to the interim final rule released with the application and application instructions, lenders may rely on the borrower representations of the forgiveness amount, stating that a “lender does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its request for loan forgiveness and attests that it accurately verified the payments for eligible costs.” Moreover, should a borrower apply for forgiveness of costs exceeding the borrower’s PPP loan amount, the lender should confirm the borrower’s calculations on the loan forgiveness application, “up to the amount required to reach the requested [f]orgiveness [a]mount.” The SBA notes that it began approving PPP forgiveness applications and remitting payments to lenders on October 2 and “will continue to process all PPP forgiveness applications in an expeditious manner.”

Additionally, on October 7, the SBA updated the PPP FAQs to add a question on the payment deferral extension granted by the PPP Flexibility Act. As previously covered by InfoBytes, the PPP Flexibility Act extends the six-month payment deferral period to at least 10 months after the program expires. Specifically, the FAQs confirm that the extension of the deferral period will automatically apply to all PPP loans, requiring lenders to “give immediate effect to the statutory extension and [] notify borrowers of the change to the deferral period.” Moreover, the FAQs emphasize that the SBA does not require a formal modification of the promissory note.

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