The Small Business Administration (SBA) is making it easier for businesses to get their Payroll Protection Plan (PPP) loans forgiven, yet some of the nation’s largest lenders are opting to chart their own path.
Last week, the government opened a new application portal in order to speed up decisions on whether outstanding loans will be forgiven, or if businesses will need to repay them.
The initiative is only for loans of $150,000 or less, which make up 92% of the PPP loans distributed. The new online portal is reportedly designed to streamline the process both for borrowers and for the program’s nearly 5,500 lenders. Since 2020, it has provided more than 11.7 million loans totaling $800 billion to help hard businesses.
The program relied on banks to manage most aspects of the loans with very little government intervention, which meant lenders setting up their own process for collecting loan forgiveness applications and sending them to the SBA for approval.
"The SBA's new streamlined application portal will simplify forgiveness for millions of our smallest businesses—including many sole proprietors—who used funds from our Paycheck Protection Program loans to survive the pandemic," Administrator Isabel Casillas Guzman said in a statement.
But that’s if the bank in question is participating. Individual lenders will have to opt in for you to access the platform; indeed, more than 800 banks have opted into the direct program.
“As one of the leading PPP lenders in the nation, Customers Bank is proud to partner with SBA to deliver responsive digital loan forgiveness service to the small business borrowers,” Sam Sidhu, President & CEO of the bank said in a statement.
To be sure, several lenders prefer using their own system out of caution, following some of the agency’s struggles throughout the pandemic with overload technology systems.
However, it’s clear that several of the program's largest lenders are not on board with delegating loan forgiveness to the government's fledgling system. PNC Financial (PNC), Pittsburgh’s biggest bank, is among those sticking to their own portal for PPP forgiveness applications instead of the SBA's solution, where certain loan recipients can bypass their lenders.
“Considering we have already built a streamlined end-to-end digital portal and associated review process for your PPP Forgiveness application, we will be opting out of using the SBA’s forgiveness portal,” PNC said in a statement on its website.
Meanwhile, JPMorgan Chase (JPM) — the largest U.S. bank — is also going its own way.
“We are encouraging customers to submit their forgiveness applications through our platform. Over 80% of 2020 loan recipients at Chase have had their loans forgiven,” according to Elizabeth Seymour, a bank spokeswoman.
Other banks have yet to publicly indicate whether they are participating in the SBA’s direct forgiveness program.
'We're still struggling'
Meant to keep employees on the payroll during a time of tremendous upheaval in the economy, PPP loans were an attractive program to borrowers because of the interest rate of just 1%, and could be entirely forgiven at taxpayers’ expense.
However, with the economy rebounding strongly, there are lingering worries from small business owners that they’ll have to pay off the debt, regardless of whether they can actually afford it.
“If it wasn't forgivable, then we wouldn't have taken it and we would have just gone and found another job,” said Todd Hamblin, CEO and president of Global Aerospace Design.“We would have had to disband and move on.”
And many small businesses are still hurting due to the pandemic. A June survey by Goldman Sachs found 8 out of 10 small business recipients said their PPP funds would be exhausted by the end of July. Just 24% are very confident they could maintain payroll once their PPP money ran out.
“We're still struggling just because the global market hasn't gone back up, business travel is still way down,” Hamblin added.
“We were having issues getting any new business coming in. So our revenue is probably even worse than last year,” he added.
Still, it’s clear that there’s more forgiveness going on than repayment. According to the latest agency data, 80% of the 5 million PPP loans are fully or partially forgiven.
If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer considered 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
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