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Though the U.S. Small Business Administration's forgiveness portal for Paycheck Protection Program loans has been open for more than two weeks, most lenders are not accepting applications just yet.

One local bank says it's doing things differently.

Farmers & Merchant Bank in Miamisburg processed its first forgiveness application just three days after the SBA opened its portal. By Aug. 21, the bank had submitted paperwork for about 30% of its 250 PPP loans — all $27 million of which should be eligible for forgiveness.

"With all the trouble that ended up happening the first time with everything getting bogged down and crashing, we thought, ‘Let’s jump the gun. Let’s just go ahead and start getting these in,' president and CEO Shon Myers told me. "We've already gotten feedback from the SBA on a couple, so we know they’re looking at them."

Amid an unprecedented volume of loan applications being submitted, the SBA website faced repeated system crashes during both funding rounds of the small-business bailout program. Mass uploads by larger institutions bottlenecked the SBA's electronic filing system, E-Tran, prompting the administration at one point to sideline lenders with more than $1 billion in assets to ensure access for the nation's smallest banks.

"When mass filing starts happening, how long of a delay will it be?" Myers said. "(The SBA is) saying they'll have approvals within 90 days, but I'm fearful that when it all hits at once, it may be 120 or 180 days. We could be in the first quarter before they find out if they're forgiven or not."

Hesitation among lenders to accept forgiveness applications isn't a surprise, Myers said. A number of Dayton's most active PPP lenders need more time to finish development of automated software that can interface with the SBA's filing system to process submissions.

As well, some burning questions — like whether loans under $150,000 will be automatically forgiven — remain up in the air. That proviso would be a major windfall for most lenders, making a lot of the work it takes to process applications completely unnecessary.

"It’s time savings," Myers said. "About 85% of our loans were under $150,000, and I think that’s somewhat true nationwide. That's a lot of loans that would all be forgiven."

But although the proposal has gained considerable traction, there isn't much guidance on when a final decision might be reached — and an ongoing Congressional stalemate over the next Covid-19 relief bill has banks and credit unions grappling with the possibility of unexpected changes to the rules governing the forgiveness process.

For context, the SBA updated its interim final rules guiding the $659 billion relief program at least 20 times through the end of June.

"In that first round when they kept changing the rules, everybody was hesitant — and we were that way at first, too," Myers said. "But they always grandfathered everything before that ... So, if all of a sudden they do a punitive change that nobody could have expected, at least ours will have already been in." 

Eligible borrowers that opted to use the original eight-week expenditure period are eager for their forgiveness applications to be processed. For those who selected or were assigned a 24-week window, there are likely weeks or more remaining before the covered period ends, meaning most forgiveness applications cannot be submitted until September or later. And until that timeframe approaches, most banks are unlikely to rush to accept new applications, Myers said.

"We just think there’s value to getting it done sooner than later," he said. "Why do it all at once? If we’ve got borrowers ready, let’s help them out."

Fisher, Jacob. “Why One Dayton-Area Bank Is Bucking the National Trend on PPP Forgiveness” Bizjournals.com, Dayton Business Journal, 27 Aug. 2020, www.bizjournals.com/dayton/news/2020/08/27/why-some-banks-are-holding-off-on-ppp-forgiveness.html.