SBA changes policy to end forgiveness review process for PPP loans over $2 million

July 19-25, 2021

By Wesley Brown


Although the Biden administration has not made a public announcement, the U.S. Small Business Administration is in the process of implementing a policy change to eliminate the loan necessity review for Paycheck Protection Program (PPP) loans of more than $2 million.


According to information provided to The Daily Record by SBA District Director Edward Haddock, who oversees the SBA’s operation in Arkansas, federal officials recently released several important updates to agency-approved lenders “to optimize the forgiveness process for the industry.”


Effective immediately, SBA will no longer request the loan necessity questionnaires for any PPP loan reviews of $2 million or greater, said Haddock.  “Loan Necessity Questionnaires that SBA has previously requested are no longer required to be submitted to SBA,” he said.


The change in the review process for loans of $2 million or more comes nearly 15 months after former Trump administration officials requested companies to submit additional financial statements. That request in came in response to complaints that large corporations and publicly traded firms had gained access to the much-need PPP funds intended for true mom-and-pop small businesses struggling to recovery from the pandemic.


At the time, Treasury Secretary Steven Mnuchin and then-SBA Administrator Jovita said the SBA would review all PPP loans of more than $2 million to make sure borrowers’ self-certification for the loans was appropriate. The recent about-face under new SBA Administrator Isabel Guzman comes as lenders and borrowers have complained that the understaffed SBA has been slow in responding to information about the loan forgiveness process.


Haddock said the SBA will soon release FAQs regarding the recent changes in the forgiveness process for the banking industry. The Loan Necessity Questionnaire module within the SBA’s online processing platform will be removed immediately, he said.


The Arkansas SBA administrator also said the federal agency that oversees more than $1.2 trillion in COVID-10 emergency funds appropriated through the PPP and Emergency Injury Disaster Loan programs is now processing payment corrections as previously announced. “The functionality to expedite this process was made available earlier this week,” Haddock said.


The recent SBA updates comes just over a month after the SBA shuttered the PPP program on May 31, which changed its focus under the Biden administration to aid underserved and minority communities that were struggling to get through the pandemic.


On July 2, the SBA also announced the closure of the $28.6 billion Restaurant Revitalization Fund (RRF) program, a recently created fund to provide economic aid to restaurants and other frontline food and associated establishments struggling to make ends meet because of the pandemic.


As of June 30, Guzman said the RRF program received more than 278,000 submitted eligible applications representing over $72.2 billion in requested funds, three times the amount available. Nearly approximately 101,000 applicants have been approved to restaurants, bars and other restaurant-type businesses, SBA officials said.


In a recent interview with The Daily Record, Arkansas Hospitality Association Executive Director Montine McNulty said while restaurants and lodging establishments across the state are seeing a pickup in business following the end of Gov Asa. Hutchinson’s public emergency declaration on May 30, employers in Arkansas are still dealing with financial setbacks and struggling to get back to full speed.


“Everyone is experiencing employee shortages,” said McNulty, whose organization is also the umbrella clearinghouse for the Arkansas Lodging Association, the Arkansas Restaurant Association and the Arkansas Travel Council. “What I am hearing is that they are not available, they can’t find help and it’s affecting the restaurants, the hotels, special events, or any type of hospitality business.”


Meanwhile, many PPP lenders and borrowers are still waiting for the SBA and U.S. Treasury to respond to forgiveness requests from the first round of PPP funds approved under the $2.2 trillion Coronavirus, Aid, Relief and Economic Security (CARES) Act, signed into law on March 27, 2020. The chaotic PPP loan program that kicked off in April 2020 led to accusations of fraud and favorable treatment to large publicly traded firms and billionaires.


Since then, the second and third round of PPP funds have been approved under the Consolidated Act Appropriations Act signed into law on Dec. 27, 2020, and Biden’s $2.2 trillion American Rescue Plan signed into law on March 11. Terms for both the first and second draw PPP loan programs require borrowers to spend at least 60% of the loan proceeds on payroll cost and other associated expenses to be eligible for forgiveness.


To date, 5,467 SBA-lender handed out nearly $800 million to 11,823,594 small businesses across the U.S. since the program was unveiled in late March 2020 as the centerpiece of the Coronavirus, Aid, Relief and Economic Security (CARES) Act. In 2021, 5,242 SBA-approved banks, credit unions, minority owned-banks and community development financial institutions (CDFIs) have approved $277.7 billion in PPP loans to 6,681,929 businesses.


Under the PPP2 rules approved by Congress and signed into law by former President Donald Trump on Dec. 27, Congress allocated another $325 million in targeted aid to small business owners, including an additional $284 billion for PPP (PPP) loans and $20 billion for EIDL grants through the SBA offices in all 50 states. However, the revised program only allowed businesses with fewer than 300 employees and at least a 25% reduction in revenues in at least one quarter in 2020 to gain access to up to $2 million in forgivable loans, down significantly from the earlier 500-employee baseline and $10 million maximum loans in the CARES Act.


The new legislation also made publicly traded companies ineligible to receive the new PPP loans while also excluding businesses involved in lobbying activities or those tied to Chinese firms with at least a 20% ownership stake. The SBA will also receive an additional $50 million to audit and mitigate fraud in PPP and EIDL programs.


In response to criticism that the earlier PPP and EIDL loans under the CARES Act left out black and minority-owned businesses, the PPP2 program also included $12 billion in appropriations for Minority Depository Institutions and Community Development Financial Institutions that underserved firms. Another $20 billion directed SBA grants to companies in low-income communities.


Through 68 district offices across the U.S., the SBA has worked in close partnership with states and local communities to oversee the agency’s PPP and EIDL loan programs during the pandemic. Locally, the Arkansas SBA District Office led by Edward Haddock, has held weekly calls and webinars to update local businesses funding options to assist small businesses affected by the COVID-19 pandemic, including webinars on the SBA’s loan forgiveness and review process.


According to the latest PPP data, Arkansas SBA office has processed $5.05 billion in total PPP funding, including about 500 loans above the $1 million mark.   




The U.S. Small Business Administration recently implemented policy changes for certain PPP loans, according to Edward Haddock, SBA's Arkansas district director.