The American Bankers Association and seven other financial trade groups yesterday urged Congress to address the Small Business Administration’s approach to loan forgiveness for borrowers that received both Economic Injury Disaster Loans and Paycheck Protection Program loans.
EIDL advances were provided to nearly one million small businesses as emergency grants, but many recipients also applied for PPP loans and “lenders did not know whether an applicant had received an EIDL advance or would receive one in the future,” the groups said. The SBA later reversed its guidance to say the forgiven amount of PPP loans must be reduced by the amount of a borrower’s EIDL advance, effectively transforming a significant portion of a grant into a loan, or wiping out PPP loan forgiveness altogether.
“At a minimum, SBA should immediately stop the transfer of any residual EIDL advance balances to PPP lender balance sheets and return them to the SBA Office of Disaster Assistance, which administers the EIDL program,” the groups wrote.
