Monday was opening day for small business borrowers to apply for forgiveness of their Paycheck Protection Program loans.
Arkansas bankers, however, were advising clients to await the outcome of ongoing congressional negotiations to develop a new economic stimulus bill, which could alter the forgiveness process.
Businesses have up to 10 months from the time they used the loan to apply for forgiveness of payroll and other essential expenses.
"Not only is there time to do so, but there is both a House and Senate bill being debated for new covid-19-related stimulus that includes automatically forgiving all loans under $150,000 and less," Chris Padgett, executive director of the Arkansas Community Bankers Association, said Tuesday. "So, some banks may be holding off to see how this unfolds."
Banks play a key role in facilitating the forgiveness process. Borrowers submit an application to the bank, which then formally applies to the U.S. Small Business Administration.
The lender has up to 60 days from the receipt of a completed borrower application to enter it into the SBA's forgiveness platform.
The SBA then works back through the bank to notify the small business if the application is approved. The agency can take up to 90 days to approve a loan.
Arkansas Capital Corp., which issued about 800 loans, is advising those borrowers to monitor the Congressional negotiations and wait to apply because the business could get more generous forgiveness terms.
"We're getting a lot of questions from borrowers now and we're advising them to be patient and wait," said Sam Walls, chief operating officer and president at Arkansas Capital. "There is a long window to apply for forgiveness, so it seems prudent for everyone to wait and see what happens. There could very well be blanket forgiveness for loans under $150,000."
More than 41,000 small businesses in Arkansas borrowed more than $3.2 billion under the program. The average loan in the state was under $80,000, according to the SBA, which administers the program.
Under current terms, borrowers can have up to 24 weeks of payroll and other essential business expenses forgiven, meaning they don't have to repay the funds.
The federal agency rolled out a simplified EZ forgiveness application for borrowers on June 17 and is now spreading word that the process is open. The SBA has been advising small businesses to get their paperwork ready to submit.
Yet an SBA official said Monday the agency has no official position on when borrowers should apply.
"The official SBA guidance is that a borrower has up to 10 months from the end of the covered period to submit their PPP forgiveness application to their lender," state Deputy District Director Jerry Talbert said Tuesday. "SBA has no recommendations regarding waiting before applying for PPP forgiveness -- it is really the decision of the borrowers and/or lenders."
Arvest Bank is preparing its internal systems to handle the applications, but it, too, is monitoring the congressional talks.
"Arvest Bank continues to finalize an electronic process that our customers will use to facilitate the forgiveness phase of the Paycheck Protection Program and also monitor currently proposed legislation that could further streamline the process," the bank said in a statement. "We will be ready to adjust accordingly if needed."
SBA's Arkansas office has been conducting a series of hour-long webinars since June to help small businesses navigate the forgiveness process. The next webinar is scheduled for 3 p.m. today. More information is available online at sba.gov/coronavirus.
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