SBA Launches Faster Relief Loan Cancellation Process For Small Businesses

For exchange bank customers Dave and Terri Erickson, the Federal Paycheck Protection Program loan has been a lifeline.

But having the loan canceled is as if the Rohnert Park auto repair shop has reincarnated and resumed operations.

“It helped us. We were able to keep our guys employed, especially since no one came in early, ”said Dave Erickson.

When the shelter-in-place orders were issued in March, Erickson and his wife, Terri, owner of Automotive Excellence which opened in 1988 on Executive Avenue, were concerned about their four full-time employees. Although it is considered an essential business, the work fell when people squatted.

“Payroll has eaten it all up,” Terri said of the $ 80,000 the couple borrowed.

A few months ago, they filed a request to cancel the PPP loan, entering a process that has experienced a reincarnation of its own. Their loan process was relatively easier than the first version.

The US Small Business Administration has updated the application process three times, in an effort to make it easier to complete.

The latest home designed distinguished those who borrowed less than $ 50,000. This is a version promoted as a new and improved application by the SBA. He promises that the whole process takes 15 minutes to complete in order to get the 1% loan exemption.

“When the first app was deployed, it was multi-page and complicated,” said Miryam Barajas, spokesperson for SBA’s Pacific Rim 9 region.

Small business owners contacted the SBA and told the agency they “should hire people” to translate the forms, Barajas admitted.

“They told us, ‘We’re just trying to survive this,’ she said of the circumstances surrounding the national economic crisis. In other words, small business owners couldn’t afford another cut in their budget.

The SBA released its third version on October 8.

“The company would still be required to prove how it used the funds,” she said, referring to guidelines dictating that three-quarters of the workforce should be retained.

“The banker would then examine their request, along with their supporting documents. Once the banker approves the applications and documents, the bank submits them to the SBA for them to consider a remission, ”said the SBA official.

With that, the SBA got the approval of the North Bay bankers.

Exchange Bank executive vice president and chief credit officer Michael Sullivan estimated that 48% of the 1,800 PPP loans processed by the Santa Rosa financial institution were for amounts under $ 50,000.

So far, 600 borrowers from Exchange Bank have started the process. Of these, 100 were submitted to the SBA.

“We are very excited about this. This is a huge benefit for borrowers. It’s much simpler now, requiring no calculations. We just put the dollar amounts with the disclosures and verified the information, ”Sullivan told the Business Journal. “We think it is a very right thing to do.”

Some banks expected a more streamlined process for loans up to $ 150,000, but legislation enacting such a change never materialized.

Given the fluid nature of the application processes, bankers and borrowers have delayed submissions. And for some borrowers, money tax questions arose.

“We told people that there was no real rush. We were waiting to see what changes would happen, ”Sullivan said.

Neighboring Summit State Bank was on the same page.

“It’s a start for most of the banks, including us. We were hoping (the updated process) for loans of up to $ 150,000 because, quite frankly, that’s half of our loans. But it’s very helpful that the $ 50,000 loans are clear, ”said Brian Reed, President and CEO of Summit State Bank. “We’ll take whatever we can get (for help). “

In the first month of the remission process, less than 10% of borrowers filed with Summit State Bank. Now, about a quarter of borrowers are starting the process, Reed added.

The largest credit union in the region also supported the new version of the app.

“The new one-page form streamlines the PPP forgiveness process and provides administrative relief for small businesses,” said Ron Felder, chief financial officer and risk manager for Redwood Credit Union.

Felder pointed out that the new app also eases the burden on lenders, which will allow them to process forms faster. Redwood Credit Union plans to apply the new process to about 74% of the loans it has generated, Felder added.

The SBA began approving PPP forgiveness requests and distributing payments to PPP lenders to their borrowers on October 2. Under federal rules, businesses have 10 months from the date they received the loan to apply for the forgiveness of their loans from the banks.

The federal agency estimates that the stimulus package included in the $ 2.2 trillion CARES law passed in March has supported more than 51 million jobs across the country. It resulted in 5.2 million loans valued at $ 525 billion.

A few hiccups appeared along the way. The most recent was with the Internal Revenue Service warning that business borrowers requesting loan waivers cannot use them as business expenses.

Over 4,100 federal support loans totaling $ 1.4 billion have been processed at financial institutions in Sonoma, Napa, Marin, Mendocino and Solano counties.

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