Articles
July 20, 2020

Proposed Legislation Expedites PPP Forgiveness for Loans Under $150K

A new bill is now pending in the Senate which enhances lender protections and facilitates forgiveness for those PPP borrowers receiving PPP loans of less than $150,000.  Proponents of the legislation have explained that the bill would cover 85 percent of PPP borrowers but only 26 percent of the funds obligated.

Known as the “Paycheck Protection Small Business Forgiveness Act,” this bill establishes “hold harmless” provisions that protect PPP lenders by expressly authorizing a lender’s reliance “on all certifications and documentation submitted by an applicant or eligible recipient pursuant to any requirement in statute regarding covered loans, or rules or guidance promulgated to carry out any action relating to covered loans, from an applicant or eligible recipient attesting that the applicant or eligible recipient has accurately verified all documentation provided to the lender.”  Moreover, the bill expressly forecloses any enforcement action against such lenders relating to loan origination, forgiveness, or guarantee based on such reliance. 

The bill also proposes to provide small business borrowers with additional forgiveness relief by shortening the forgiveness application process and narrowing the enforcement exposure of such borrowers. 

Specifically, the bill proposes that a covered loan made to an eligible recipient that is not more than $150,000 shall be forgiven if the eligible recipient submits a one-page form to the lender attesting that the eligible recipient complied with the PPP requirements and is eligible for forgiveness.   The bill also proposes limiting enforcement actions against eligible loan recipients to those against borrowers committing fraud or who spent loan proceeds for disallowed purposes.

While the future of this bill is not certain, it has bi-partisan support and is being lobbied by the American Bankers Association and unanimously by the state bankers’ associations. Borrowers would benefit by the avoidance of worksheets and documentary payroll and expense evidence in support of their forgiveness applications.  By reducing the document requirements for the forgiveness of these smaller PPP loans and establishing hold harmless provisions, participating lenders will also benefit as they will be able to simplify their own internal PPP forgiveness processes with reduced exposure to potential enforcement liabilities.

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