Newsroom

A flash report from the Office of Inspector General (OIG) reviewing the Small Business Administration's (SBA) implementation of the paycheck protection program (PPP) found that while most of its interim final rules (IFRs) and guidance released have aligned with CARES Act provisions, more needs to be done to address prioritizing underserved and rural markets, loan forgiveness and deferments, and loan registration.

The OIG initiated its review of the PPP's implementation April 24; it released the flash report in response to a request from Senate Minority Leader Chuck Schumer, D-N.Y., and Sens. Ben Cardin, D-Md., and Sherrod Brown, D-Ohio.

In order to address the areas identified, the OIG recommended the SBA:

• issue guidance to lenders requiring them to prioritize borrowers in underserved markets;
• revise the borrower application to include collection of optional demographic information for the principals for the remaining available lending authority and any future lending under the program;
• include optional demographic information on forms used to request loan forgiveness for loans that have already been disbursed;
• evaluate the potential negative impact to borrowers regarding the specified percentage of loan proceeds eligible for forgiveness and update the requirements as necessary;
• issue guidance to lenders on the deferment process; and
• register PPP loans by Taxpayer Identification Number (TIP).

PPP loans are intended to be used to cover payroll costs and other employee benefits, as well as some facility and operational costs. Current SBA guidance requires that at least 75 percent of PPP loan funds be used toward payroll expenses to have loans forgiven.

Under this forgiveness requirement, the OIG found that "tens of thousands of borrowers would not meet the 75-percent payroll cost threshold and would therefore have to repay the amount of nonpayroll costs in excess of 25 percent in less that 2 years" (when loans mature). It also noted that the CARES Act allows for a 10-year maturity for PPP loans.

Some lawmakers are considering proposing changes to the PPP, including to extend the time period that businesses can spend PPP loan funds (currently set at 8 weeks) and to allow a larger portion to be used to pay non-payroll-related expenses.

NAFCU continues to advocate for more guidance from the SBA for the PPP and is engaged as lawmakers begin work on additional coronavirus relief packages. Access NAFCU's PPP FAQs here; more information is also available on the SBA's and Treasury's websites.