The Small Business Administration (SBA) makes it easier for businesses to get theirs Payroll Protection Plan (PPP) loans forgiven, but some of the country’s largest lenders are choosing to go their own way.
Last week the government launched a new application portal to speed up decisions on whether outstanding loans will be forgiven or whether companies will have to repay them.
The initiative applies only to loans of $150,000 or less, which account for 92% of PPP loans issued. The new online portal is reportedly designed to streamline the process for both borrowers and the program’s nearly 5,500 lenders. Since 2020, it has provided more than 11.7 million loans totaling $800 billion to help struggling businesses.
The program relied on the banks to manage most aspects of the loans with very little government interference, which meant that the lenders set up their own process for collecting loan forgiveness applications and sending them to the SBA for approval.
“SBA’s new streamlined application portal will simplify forgiveness for millions of our smallest businesses — including many sole proprietors — who have used funds from our Paycheck Protection Program loan to survive the pandemic,” Administrator Isabel Casillas Guzman said in a statement.
“As one of the nation’s leading PPP lenders, Customers Bank is proud to partner with SBA to offer small business borrowers a responsive digital loan relief service,” said Sam Sidhu, the bank’s president and CEO, in a statement.
Certainly, several lenders prefer to use their own system out of prudence after some of the agencies struggled with overburdened technology systems during the pandemic.
But it’s clear that some of the program’s biggest lenders aren’t on board with delegating forgiveness to the government’s fledgling system. PNC Financial (pnc), Pittsburgh’s largest bank, is among those sticking with its own portal for PPP forgiveness requests rather than the SBA’s solution that allows certain borrowers to bypass their lenders.
Meanwhile, JPMorgan Chase (JPM) – the largest US bank – is also going its own way.
“We encourage clients to submit their requests for forgiveness through our platform. Over 80% of Chase’s 2020 borrowers have had their loans forgiven,” said Elizabeth Seymour, a spokeswoman for the bank.
Other banks have yet to publicly state whether they participate in the SBA’s direct forgiveness program.
“We’re Still Fighting”
PPP loans, designed to keep employees on the payroll in times of tremendous economic upheaval, were an attractive program for borrowers because of the interest rate of just 1% and could be forgiven entirely at taxpayers’ expense.
However, as the economy recovers strongly, there are lingering concerns among small business owners that they will have to pay down debt, regardless of whether they can actually afford it.
“If it wasn’t forgivable, we wouldn’t have taken it and just found another job,” said Todd Hamblin, CEO and president of Global Aerospace Design. “We should have disbanded and moved on.”
And many small businesses are still suffering from the pandemic. ONE 8 out of 10 small business beneficiaries said their PPP funds would be exhausted by the end of July. Only 24% are very confident they can keep up payroll once their PPP money runs out.
“We’re still struggling just because the global market hasn’t bounced back and business travel has still fallen sharply,” Hamblin added.
“We had problems generating new business. So our earnings are probably even worse than last year,” he added.
If Borrowers do not request forgiveness within 10 months of the last day of the Covered Period, PPP Loan Payments will cease to be deemed deferred and Borrowers will begin making loan payments to their PPP Lender.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv