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PPP Charitable Loan Forgiveness Hasn’t Started Yet is based on the work of INSIDE CHARITY’s team of researchers. Here’s what they’ve discovered so far:
More than 96,000 requests for Paycheck Protection Program loan forgiveness have been submitted to the Small Business Administration since early August, but none were approved. The Treasury Department and SBA have not yet forgiven any of the 5.2 million emergency coronavirus loans issued to nonprofits and small businesses — but that’s about to change. Charities that received Paycheck Protection Program funds, as well as their banks, have been frustrated by the difficulty in applying for loans to be forgiven, despite rules saying that if the funds are spent mostly on payroll they will not need to be paid back. SBA announced last week that it has not processed any applications so far. Treasury and SBA officials have said they plan to begin considering applications shortly. SBA officials say they opened the system for forgiveness Aug. 10, two days after the program closed. The agency has 90 days to consider each application after it receives bank approval, according to the Cares Act.
Secretary Steven Mnuchin indicated, “PPP requests will start to be approved and paid late this week or early next.” The move comes as banks and small businesses have raised concerns about the onerous process of applying for forgiveness.
Forgiveness for smaller PPP loans is expected to be processed quickly, while loans above $2 million will face additional scrutiny. Loans of $2 million or more account for just 0.6 percent of the 5.2 million that have been approved, and 20 percent of total funds disbursed, according to the SBA. The average size of a PPP loan is $101,000.
PPP Charitable Loan Forgiveness Hasn’t Started Yet!
Lawmakers continue to debate additional small-business relief measures, including allowing eligible businesses to receive second PPP loans, or providing blanket forgiveness for loans of less than $150,000.
In a late August survey, 44 percent of PPP borrowers told the National Federation of Independent Business that they would apply for a second loan if it were made available, and 84 percent of respondents said they had already used their first loan.
Jack Murphy, president of business banking at Citizens Financial Group, said at a conference Tuesday that the forgiveness process has been unexpectedly complex. “It’s taking us two weeks to process an application,” he said. “Four to six contacts between small-business owner and the folks that are trying to process the forgiveness applications.”
SBA Expresses Concerns About EIDL Fraud
In other news, the SBA inspector general’s office issued an additional report warning that $250 million in disaster relief funds from the agency’s Economic Injury Disaster Loans (EIDL) program went to nonprofits and businesses that were launched after Jan. 1, 2020, which should have rendered them ineligible. Another $45 million in duplicate loans were issued, according to the inspector general.
SBA chief Jovita Carranza did not immediately comment through a spokesman.
The agency has still not put in the proper controls to identify and respond to possible fraud in PPP and EIDL, testified William Shear, GAO director of financial markets and community investment, who said the delays mean that “it will be a long time until we know how much fraud has been in the program.”
“There was a push to get loans out, but with the passage of time it becomes much more troubling that the fraud framework is not in place,” Shear told the House Small Business subcommittee on investigations, oversight and regulations.
Treasury and SBA officials have said they will audit PPP loans of more than $2 million and consider reviewing other loans, as well. Hannibal “Mike” Ware, the SBA inspector general, testified that investigators had identified borrowers who had created accounts established with stolen identities. In other cases, borrowers had received deposits into personal bank accounts with no evidence of business activity.
He said that to prevent additional funds from being stolen, SBA needed to be in regulator contact with investigators as new schemes are uncovered.
“I think that they have been pretty responsive to that,” Ware said.
Members of both parties expressed concern about the amount of money from the programs being lost to waste and abuse.
“We need to ensure that loans went to the intended businesses and that the loans were used properly,” Rep. Ross Spano (R-Fla.) said.
Rep. Judy Chu (D-Calif.), chair of the subcommittee, said she was shocked by the revelations.
“I’m just astounded that these terrible acts took place when legitimate, deserving businesses could use the help,” she said.
PPP Charitable Loan Forgiveness Hasn’t Started Yet was first posted at INSIDE CHARITY.
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PPP Charitable Loan Forgiveness Hasn’t Started Yet was curated by Jimmy LaRose founder of National Association of Nonprofit Organizations & Executives
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