More than 5 million small- to medium-sized businesses (SMBs) received $525 billion from the Paycheck Protection Program (PPP), the popular federal rescue initiative passed by Congress in March. But the Small Business Administration (SBA) program that promised loan forgiveness as long as SMBs used 60 percent toward payroll and 40 percent to other allowable expenses, has yet to forgive a single loan, Politico reported.
Lenders told the news outlet that the effort to forgive the loans is faced with delays and complications that could leave employers on the hook for the money. Banks blamed the SBA and the U.S. Department of the Treasury for a lack of communication on how to proceed.
“Unless we get something both from a legislative perspective and from Treasury and SBA to make this process a little easier, it’s going to be a struggle,” said Naeha Prakash, associate general counsel of the Bank Policy Institute, a Washington, D.C.-based trade group.
While PPP has been a lifesaver for many businesses, some are worried about the debt forgiveness as they emerge from a recession, Politico reported. The rules behind forgiveness for the PPP loans dictate that if an SMB used the money correctly, that SMB won't have to pay back the loan.
Financial institutions said they have been submitting applications for loan forgiveness since early August but haven't received a response, according to Politico. Banks said they are also frustrated because they loaned their own money with the expectation that it would be repaid by the government, but they haven't received a cent.
The SBA acknowledged to Politico that it has received 96,000 forgiveness applications, about 2 percent of the total loans, but none have been approved or denied.
“No bank I know anywhere in the country has received any money from the SBA,” Brad Bolton, president and CEO of Community Spirit Bank in Alabama, told the news outlet.
“They've been pretty much radio silent over the last few weeks,” Consumer Bankers Association General Counsel David Pommerehn told Politico. “There are still a lot of technical issues banks have, and we continue to push the SBA to offer some guidance.”
Last week, SMBs were also reporting difficulty with the forgiveness aspect of the PPP.