The Small Business Administration is trying to eliminate a bureaucratic nightmare in which borrowers who are appealing their Paycheck Protection Program loan forgiveness decisions must start paying back their loans--even though the loans might eventually be forgiven. 

In its latest interim final rule (IFR), released June 28, the SBA now says anyone currently appealing their loan decision with its office of hearings and appeals can delay scheduled repayments. That also applies to anyone appealing future PPP loan forgiveness decisions. The repayment period begins 10 months after a borrower's eight- or 24-week covered period ends.

Prior to the ruling, borrowers were expected to begin making loan payments as originally scheduled, regardless of the status of their loan appeal. Going forward, borrowers will no longer need to make principal and interest payments on loans until after their appeal is resolved, which may preclude borrowers from paying anything at all if their loan ends up being fully forgiven. 

The SBA makes a point, in the IFR, to say that this deferment extension applies only to borrowers who file a "timely" appeal of a final SBA loan review decision. It's not clear what is meant by timely. The SBA was unable to respond to Inc.'s request for clarification.

All the same, the ruling stands to ease borrowers' minds at a time when millions of business owners are expected to start applying for forgiveness. According to a recent report from the Pandemic Response Accountability Committee (PRAC), a group of inspectors general from different federal agencies that tracks relief spending for the government, more than four million PPP loans, amounting to $394.6 billion, have already been forgiven. Since April 2020, the agency has helped originate more than 11.7 million loans, totaling nearly $800 billion, for more than 8.5 million small businesses.

The deferment is just one notable change within the 29-page IFR, which also unveiled details on the SBA's new PPP loan forgiveness portal. Starting August 4, the SBA is allowing borrowers with PPP loans of $150,000 or less--which account for 95 percent of all such loans issued in 2021--to apply for loan forgiveness directly with the agency. Currently, borrowers may only apply for forgiveness through their lender.

Importantly, direct forgiveness is only available to borrowers at the more than 600 banks that have so far opted into the SBA's PPP forgiveness portal. The SBA estimates that more than 2.17 million borrowers will be able to access the portal. Nearly 5,500 lenders participated in the PPP.