Borrowers—not financial institutions—are responsible for accurately calculating their payroll costs as they apply for loan forgiveness under the Paycheck Protection Program, the Small Business Administration said this week.
“Lenders are expected to perform a good faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning average monthly payroll cost,” the SBA said in a series of questions and answers about the loan forgiveness process.
The SBA opened its loan forgiveness portal this week, but some analysts are predicting that borrowers will wait to see if Congress provides automatic loan forgiveness for loans under $150,000.
Members on both sides of the Capitol and from both parties have proposed such legislation.
The authorization for the loan program expired Saturday and lenders have been required to stop accepting loan applications. As of Saturday, lenders have made more than 5.2 million loans, totaling more than $525 billion. The program still has almost $134 billion it could loan if Congress were to reauthorize it.
In the questions and answers, the SBA said that if a lender finds errors in a borrower’s calculations or other data that would not justify loan forgiveness, the SBA said that the lender should work with the borrower to correct the problems.
The SBA said that sole proprietors, independent contractors, and self-employed individuals who had no employees at the time of their loan application may use a simplified version of the forgiveness application.
Borrowers must submit their forgiveness applications within ten months after the “covered period” ends, the SBA said. Borrowers are not responsible for making loan payments during that time. Lenders are responsible for notifying borrowers if their loan forgiveness application is approved and the date the first payment is due if it is not approved.
Lenders also may accept scanned copies of documents, as well as electronic signatures, the SBA said.
Meanwhile, a private watchdog group has requested that the SBA’s Inspector General open an investigation of the PPP program, including the loan forgiveness process.
The SBA’s program has “distributed hundreds of billions of dollars with little oversight or accountability,” Kyle Herrig, president of Accountable.US, wrote in a letter to SBA IG Hannibal “Mike” Ware.
Herrig said that the last time the Trump Administration released data for loans over $150,000 was July 6, even though the program continued to operate until Aug. 8. He also said that there is no guarantee that the administration will release information about how loan proceeds have been used or about which loans have been forgiven.
“With billions of dollars funneling through the Paycheck Protection Program, there is need for a comprehensive audit to ensure that recipients acquired and used funds properly, and that forgiveness is not automatically awarded to individuals who have abused, defrauded, or otherwise misused the program,” he wrote.