PPP Loan Forgiveness Made Easy
March 30, 2021
Just days before it was set to expire, Congress passed PPP Extension Act on March 25. Credit unions now have two more months to make Small Business Administration Paycheck Protection Program loans. The program, which launched as part of 2020’s CARES Act, reopened in January with $284 billion available in funding for the small businesses that make up Main Street.
The 2021 PPP now expires May 31. Analysts expect that the remaining $78 billion in available loan capital to be exhausted in April. Therefore, credit unions need to help borrowers get forgiveness on their first draw now to help small businesses facing continuing hardship comfortably get a second PPP loan while funding is available.
In particular, small business borrowers can take advantage of new rules from the Biden administration that greatly increase the amount of PPP support available as well as expedited forgiveness eligibility. These changes are targeted to support sole proprietors and the self-employed individuals that file their taxes using Schedule C.
For example, an Uber driver who received a forgivable “first draw” loan under the 2020 rules has now become eligible for a forgivable ‘second draw’ loan of $20,833.
The biggest blockers for credit union lenders have been the fees and the forgiveness process. The 2021 rules raised substantially the fees for small-dollar loans. For example, the origination fee on a $10,000 PPP loan has increased fivefold from $500 to $2,500. Credit unions will now earn $2,500 for each loan between $5,000 and $50,000.
Alpharank’s automated PPP forgiveness solution makes getting the money back from the SBA easy. The Strategic Link partner’s platform walks borrowers through the entire forgiveness reporting process in simple steps, accurately gathering pertinent documentation and linking it to financial statements provided by the credit union, thus reducing the potential for fraud.
According to the partner, loans under $150,000 are currently being forgiven in under a week. Some forgiveness applications are even being approved within three business days.
Only 1.3% of forgiveness applications have been subjected to further scrutiny by SBA, while about 5% have been returned to the lender due to administrative errors. This is typically due to the lender reporting the wrong Tax ID or loan amount to the SBA. These are easy fixes with Alpharank.
All over the country, credit unions who have implemented Alpharank’s solution are getting feedback from small-business bookkeepers and accountants that their forgiveness platform is the best they’d ever seen.
“SPIRE’s app is the best [my bookkeeper] has seen. It was so smooth and easy to use. She has been helping her other clients complete the application and has seen some very confusing apps out there,” said a member of SPIRE Credit Union, based in Falcon Heights, Minnesota.