🔒Most PPP borrowers seeing pandemic-era emergency loans forgiven

The federal government’s Paycheck Protection Program offered businesses and nonprofits loans to pay their employees during the coronavirus pandemic, with the opportunity to seek forgiveness later on.

To avoid making payments, recipients must apply for that forgiveness within 10 months of expending the funds.

That deadline for the earliest borrowers has come, or is soon coming due. So are recipients applying? And are their loans being forgiven?

The answer to both questions is a resounding yes, according to bankers, accountants and federal officials involved in the program. The vast majority of Connecticut borrowers are seeking forgiveness in a timely fashion and seeing their debts wiped out, said Catherine Marx, director of the Small Business Administration’s Connecticut District.

“I don’t have the forgiveness data by state at this time, however, we regularly talk with banks about the process, and it is going well,” Marx said.

In total, Connecticut businesses received more than 55,000 PPP loans worth $3.2 billion, according to SBA. The program had two parts, the first in 2020 and a second round of funding earlier this year. While there are no specific figures available for Connecticut, 3.3 million of the 5.3 million PPP loans approved nationwide in 2020 had been forgiven as of May 24, according to SBA.

Now the SBA is moving to streamline the forgiveness process even more, Marx said. Until now, lenders had to apply to the issuing banks, which reviewed their applications and sent them to SBA. Starting Aug. 4, entities with PPP loans of $150,000 or less will be able to apply directly to SBA through a new portal on its website, Marx said. By eliminating a step, that will make the process easier and faster, she said.

“With the new simplified application portal, thousands of Connecticut businesses, and even sole proprietorships that borrowed PPP funds will have these funds forgiven,” she said. “Most Connecticut businesses waiting for forgiveness have loans that are $150,000 or less. It was time we made the process more efficient so businesses can get back to sustaining our communities.”

‘Everyone has been forgiven’

Gary Martin, a partner at FLP Accounting and Tax in Southington, said his clients are happy with the forgiveness process. While it can be slow, virtually everyone is approved, Martin said.

“As long as you have your documentation, it’s pretty straightforward,” he said.

Brian Kerrigan, an advisory partner with the Hartford-based accounting and consulting firm Whittlesey, said his clients have had the same experience.

“I only saw one conditional denial and that conditional denial was they had to get more information,” he said. “Pretty much everyone has been forgiven.”

A key to the forgiveness process is reminding borrowers that the deadline is approaching, said Ion Bank President and CEO David Rotatori, whose Naugatuck-based community bank wrote about 3,000 PPP loans totaling $285 million.

His bank has reached out to borrowers to let them know when they need to seek forgiveness and how to do it, Rotatori said.

It’s easy [for the borrower] to forget,” he said. “We’ve been pretty proactive.”

Marx noted the forgiveness process becomes more involved and longer for loans of $2 million or more.

“As it should because we are dealing with taxpayer money, and we want to make sure the process includes a minimum of waste, fraud and abuse,” she said.

Important lifeline

SBA relied on banks to implement the PPP program. Banks made the loans out of their own funds and SBA guaranteed them. Borrowers had eight to 24 weeks to expend the funds and 10 months after that to apply for forgiveness. Once the loan is forgiven, SBA reimburses the bank that issued it.

Even if they miss the deadline for avoiding payments, lenders can still apply for forgiveness, according to Kerrigan.

“You can file a forgiveness application up to the maturity date of your loan,” he said.

All involved said the program has been a big success, likely saving thousands of Connecticut businesses that would have otherwise ceased operations. While it got off to a shaky start, the program was soon on solid ground, accountants and bank officials interviewed for this story said.

“It’s gone very well,” Kerrigan said. “You have to consider the government put this in place and rolled it out in three weeks. They were able to put $670 billion out to small businesses. Was it perfect? No. But I think overall, they’ve done pretty well.”

Marx had high praise for the banks that partnered with the SBA. Faced with a tsunami of loan applications, bank employees stepped up to the plate, she said.

“These institutions went above and beyond to save thousands of Connecticut businesses,” she said. “Their lending teams worked day and night to process these PPP loans in 2020, and then they turned around and did it again in 2021. We are very grateful for that.”