Guidance issued by the U.S. Small Business Administration could help borrowers get their loans faster under the latest version of the Paycheck Protection Program.
"They're clearly trying to create an atmosphere to get money out quickly," Craig Mancinotti, managing director at Probank Austin, told S&P Global Market Intelligence.
The Small Business Administration issued the guidance late Jan. 6 on the newest version of the PPP after the program was given $284 billion as part of the stimulus package enacted in December. The guidance came in two parts: one interim final rule addressing the general program and another IFR addressing second-draw loans.
The guidance provides multiple options for borrowers to prove they have passed a revenue test, which they must do in order to qualify for second-draw loans. They can meet the requirement if revenue fell by 25% year over year in any one quarter or full-year 2020.
Mancinotti said another key issue for second-draw loans was the payroll information borrowers must present in order to qualify. The guidance allows them to rely on their payroll information from 2019 if they are utilizing the same lender as they did for their original PPP loan.
"That is a big help for borrowers," he said.
For lenders, the guidance states that banks can rely on documentation submitted by PPP loan applicants who attest that the supplied information is accurate and meets statutory requirements.
Michael Budinger, a principal with Crowe LLP, said that while the underwriting burden is relatively light, lenders should do "some level of review" to ensure borrowers have the necessary documentation to receive their loans or have their loans forgiven.
"[The SBA is] not just going to turn a blind eye," Budinger said. "They're looking for a level of effort."
Mancinotti said the general IFR offers clarity to borrowers and lenders on the length of time a borrower has to seek loan forgiveness. The IFR states that a borrower can apply anytime between eight and 24 weeks. The Probank Austin practitioner said that there was previously "a lot of debate" regarding whether borrowers had to choose either an eight-week or 24-week period.
The guidance "doesn't make anybody worry about whether they need to wait 24 weeks before they apply for forgiveness," he said.
Both he and Budinger said lenders are still waiting for the simplified, one-page forgiveness form for loans of $150,000 or less, an additional feature of the new PPP.
Depending on what that form looks like, it could alleviate complexity "for a significant volume of forgiveness applications," Budinger said.
"We don't know, we haven't seen it yet, but there's an assumption that there will be some simplification for both lender review and borrower submissions," he said.
Budinger pointed to a simpler forgiveness application form released by the Treasury Department in October for loans of $50,000 or less as an example of what the SBA could provide for loans of $150,000 and under in this new round.
Lisa Simpson, vice president for firm services at the American Institute of Certified Public Accountants, said she expects many PPP forms — including those for second-draw loans — to be out as early as Jan. 8.
Speaking during a virtual townhall, she praised the SBA for putting out consolidated guidance in a "holistic form" that makes it easy to understand. That is important, she said, given that this new round of the PPP closes in March.