Small businesses eager to submit their forgiveness applications for Paycheck Protection Program loans may have to wait.
While the Small Business Administration officially opened its forgiveness portal to lenders Aug. 10, many lenders will likely wait, according to banks and experts. That is because the potential for shifting guidance, new legislation and a desire to fully prepare for a flood of applications means banks have little incentive to launch right away.
San Francisco banking giant Wells Fargo said in a statement it was waiting on additional guidance from the SBA regarding forgiveness and couldn't confirm a date when it will begin processing forgiveness applications. JPMorgan Chase & Co., the largest single processor of PPP loans, said it would not have its forgiveness process up and running until late August or early September.
Bank of America also was not accepting forgiveness applications Aug. 10, saying it was “communicating directly with clients with additional instructions on how and when to apply.” Truist Bank and PNC Bank both said they would begin accepting forgiveness applications from small businesses later this month.
Those five banks, the top five PPP lenders by total dollar amount, accounted for 968,109 PPP loans through July 31, according to SBA data, or about 19% of the more than 5 million PPP loans made through that date. The SBA approved a total of $521.3 billion in PPP loans through that date.
Richmond, Virginia’s Atlantic Union Bank, which processed an outsized number of PPP loans for a bank its size, said it would begin accepting forgiveness applications on Aug. 19, with CEO John Asbury saying they are live testing the portal.
“We will send email invitations to PPP borrowers to begin the forgiveness process, and will do so in daily batches in order of the loan funding date [with the earliest first],” Asbury said in an email, but added if forgiveness rules change, they will update the portal accordingly. “We are watching the pending legislation in Congress with great interest as it could substantially reduce the forgiveness application process, particularly for loans less than $150,000 if passed.”
Automatic loan forgiveness for smaller loans is just one of the many changes Congress is contemplating for the PPP, which includes different streamlined loan forgiveness rules depending on the size of the loan, the ability for some small businesses to draw extra money on their first PPP loans and the ability to get an expanded set of costs forgiven, among others.
JPMorgan stated that while it was monitoring Congress, it would not wait for legislation as it builds its portal. However, if loans below $150,000 were automatically forgiven, that would account for about 90% of its PPP loans, the bank stated.
Jeff Morlend, a finance partner at law firm Sullivan & Worcester LLP, said he has talked to a few banks that are taking a wait-and-see approach to what has become a series of changing PPP requirements and shifting guidance and the expectation of additional changes in the future.
“They want to see how things go, and if guidance does come out or if the application is revised then they want to be able to wrap their heads around it and get their internal processes up to date before they start accepting applications,” Morlend said. “The number of applications that are going to flood in once the gates are open is pretty significant.”
And if the SBA or Congress changes the forgiveness rules after a bank has started accepting applications, that just creates extra work in a pipeline that could already be at capacity, he added.
He pointed to the multiple iterations of the loan forgiveness application, first issued May 15, then revised June 16, along with a separate streamlined application, as well as additional loan forgiveness information issued in early August.
Banks and borrowers are still unsure if there might be additional updates or guidance in the coming days, Morlend added. And for companies that have taken the time to fill out their materials, they also have to decide whether to submit right away.
“That’s kind of the game that a lot of companies are playing right now — do we submit as soon as the portal opens and be ready to do that? Or do we wait or see if things have to change again?” Morlend said.
And while banks were given fees for processing loans and only obtain the forgiveness funds after submitting an application to the SBA, there is nothing in the law that states when they must do that, according to Tenley Carp, a partner at law firm Arnall Golden Gregory LLP.
“There is nothing in statute, regulation or even guidance telling the banks they have a deadline by which they must accept the loan forgiveness applications from the borrowers. And that’s huge because we have an open-ended problem here,” Carp said.
For banks that processed huge numbers of PPP loans, their biggest concern is to streamline and automate the process so they are not overwhelmed by a flood of forgiveness paperwork, Carp said.
This article originally appeared on the Washington Business Journal’s website.