Main Street Monday – Lawmakers Push for PPP Forgiveness For Good Faith Loan Amount Errors

October 3, 2022

Delaney Sexton
Contributing Editor

Main Street Monday – Lawmakers Push for PPP Forgiveness For Good Faith Loan Amount Errors

“On January 15, 2021, SBA announced that amounts of PPP loans received due to ‘excess loan amount errors’ are not eligible for loan forgiveness and must be repaid,” reads a letter sent to Administrator Isabella Guzman by 40 lawmakers. “Multiple witnesses before the Committee on Small Business have testified these loan amounts should be eligible for forgiveness because, in many cases, loan amount miscalculations were caused by confusion over the evolving program rules, especially early in the program.”

The letter mentions the frequency of rule changes and guidance updates throughout the PPP program, which made it hard for lenders and borrowers to keep up with regulations. For smaller businesses that have less access to accountants and attorneys, this easily allowed for good faith loan amount miscalculations.

There are over 300,000 PPP loans with excess loan amount errors totaling $3.775 billion. The average excess PPP loan amount error is $12,403, and even in cases where the borrower used the loan proceeds for eligible and forgivable purposes or the lender made a good faith error, the borrower is still required to pay the PPP loan back. Many of the smallest businesses cannot sustain the unexpected debt that comes from this issue.

In the letter, the lawmakers ask that the SBA rescind the policy to allow excess amounts received due to good faith errors to be eligible for loan forgiveness. Addressing this issue would “represent the federal government making good on its promise” to small businesses that their PPP loans would be forgiven if spent correctly.

“Despite their best efforts to comply with rapidly changing PPP rules, many of the smallest businesses now owe an unexpected debt that threatens their very survival,” says Sunny Glottman, a researcher at the Center for Responsible Lending, in a statement. “This burden is disproportionately shouldered by microbusinesses and businesses owned by people of color. Congress and the SBA should rescind the Good Faith Error rule and remove additional barriers to loan forgiveness.”

MarketWatch Article