Feds create portal to forgive PPP loans after banks drag feet; top banks opt out, leaving businesses at their mercy

Three major lenders participating in the Paycheck Protection Program have opted out of a new process that would allow the Small Business Administration to directly forgive businesses' loans. Lenders representing only half of all outstanding PPP loans have opted in. That leaves small businesses with no other recourse if their bank won't forgive the loan or drags out the process, Bryce Covert reports for The Intercept. Click here for a searchable database of PPP loan applications.

Small-business owners were urged to take out PPP loans early in the pandemic; the loans, the SBA promised, would be forgiven if spent mostly on payroll, and would essentially become grants. But many small-business owners have had a hard time getting their lenders to forgive their loans. "Banks were incentivized to issue PPP loans through the fees they generated, but they don’t receive any fees to push forgiveness through, and they’ve dragged their feet," Covert reports. "Of the total PPP loans that have been issued, less than half have been forgiven thus far."

The SBA announced in late July a portal that would allow some small-business owners to do an end-run around such banks and get direct government forgiveness of their loans. But the portal was opt-in, and "Bank of America, JPMorgan Chase, and PNC have all decided to opt out, according to emails shared with The Intercept," Covert reports. "As of the end of May, JPMorgan Chase was the top PPP lender, followed by Bank of America in the No. 2 spot; PNC is No. 11."

The three banks have touted their streamlined forgiveness processes and implied that the SBA portal was unnecessary. However, "for some business owners, being cut off from the SBA’s direct program could mean they can’t get some or all of their loans forgiven at all," Covert reports. "Some banks have been contacting small business owners in recent months and telling them that they shouldn’t have received the original amount they received — which the banks themselves approved — and requiring the owners to pay back the difference. But many told The Intercept that they used the money correctly and had fully expected to have their entire loans forgiven."