The Biden administration is revamping the loan forgiveness process for a popular Trump-era, COVID-relief program as it enters into its final days.
Starting Aug. 4, businesses that received up to $150,000 from the federal forgivable loan program known as the Paycheck Protection Program can apply directly with the U.S. Small Business Administration for loan forgiveness.
Of the 11.7 million loans totaling $800 billion since the program’s inception in March last year, approximately 90% were for loans of up to $150,000.
Then-President Donald Trump approved the PPP as part of the mammoth Coronavirus, Aid, Relief and Economic Security Act in late March as a means to stabilize the national economy as the onset of the pandemic triggered mass business closures and record-high unemployment.
Businesses can turn the loans into grants – having those loans forgiven – if they use the funds to cover payroll and other eligible expenses. The SBA estimates that more than 6.5 million PPP loans have yet to be forgiven.
In New Jersey, nearly 311,000 businesses were approved for a combined $25.7 billion. An estimated $700 million in state-run grants and loans has been doled out or approved by the Murphy administration to help keep businesses afloat during the closures and reopening efforts.
“The vast majority of businesses waiting for forgiveness have loans under $150,000,” reads a July 28 statement from SBA Administrator Isabel Casillas Guzman. “These entrepreneurs are busy running their businesses and are challenged by an overly complicated forgiveness process.”
Under the new SBA loan forgiveness rules, certain smaller businesses no longer have to provide documentation showing that they’ve suffered a 25% loss in revenue thanks to the pandemic–a necessary condition to qualify for the loans.
The program fell under intense scrutiny in its early days, with watchdog groups and media outlets highlighting well-financed and publicly-traded companies that received the PPP loans, despite no real financial need. Many such businesses – including several in New Jersey – have since returned those funds to the federal government.
Larger businesses have the option – and the means – to apply for forgiveness through their bank. But the direct forgiveness application is meant to take just minutes for a Main Street business that, according to the SBA, might not have the time or technical expertise to go through the more drawn-out application process.
“This initiative will allow PPP borrowers to put their concerns of achieving full forgiveness behind them and focus on operating and growing their businesses again,” reads a prepared comment from Patrick Kelley, associate administrator for the SBA Office of Capital Access.