GAO Scorches SBA on PPP Forgiveness Process

The Small Business Administration’s guidance concerning the role of lenders in the Paycheck Protection Program’s loan forgiveness process remains unclear and incomplete, the Government Accountability Office said Monday.

“Representatives of two [financial services] associations commented that the resource demands and the lack of clarity surrounding the application and forgiveness processes have led to lender fatigue with the program,” the GAO said in a lengthy review of the federal government’s overall response to the coronavirus crisis.

Representatives of the trade groups noted that lender fatigue could result in lenders being less likely to participate in future rounds of the program.

Trade groups representing the financial services industry have been pushing Congress to provide automatic loan forgiveness for loans under $150,000.

In the report, the GAO said that gaps in data in myriad areas make measuring the federal response to the pandemic difficult. For example, the GAO again said that the SBA’s failure to collect demographic information about PPP recipients confounds efforts to measure how well the program has responded to the needs of small business.

The GAO noted that lending in the PPP program has stopped and that the loan forgiveness process has begun.

“But uncertainty about the lender’s role in the process and the complexity of the process could result in additional difficulties and delays for borrowers in obtaining loan forgiveness,” the GAO said.

The GAO added, “In part because the CARES Act includes specific requirements for loan forgiveness, applying for loan forgiveness is more time consuming than applying for the PPP loan itself and requires more lender review.”

The SBA issued guidance about loan forgiveness in July and August, but representatives of two lender associations said they still were not clear about the level of review that was required or the extent to which lenders could simply rely on borrower certifications and calculations.

SBA officials said they intend to put all lender decisions granting full or partial loan forgiveness through an automated process, but as of Aug. 14, well after the forgiveness process began, the agency was still developing its review process.

Representatives of one lender association told the GAO that it was a conflict of interest for lenders to be heavily involved in the loan forgives process because it was in their best interest for loans to be forgiven.