- The Associated General Contractors of America is putting pressure on the Small Business Administration to disclose more about how it's fielding Paycheck Protection Program loan forgiveness applications of $2 million or more, a process AGC claims is now taking up to eight months.
- The AGC filed a Freedom of Information Act request last week to get data about how long it takes the agency to review applications, the steps involved in approving or denying requests and who is ultimately making the decision about the loans.
- Michael Kennedy, AGC's general counsel, said the agency has been less than forthcoming about its decision-making. "The process continues to be very opaque," Kennedy said. "As time has gone by and the delay has increased, we've become increasingly concerned about what those standards and procedures may be." An SBA spokesperson declined to comment.
James Miller, a partner in the construction practice at accountancy Marcum LLP, said the process around PPP loan forgiveness within the SBA has been difficult to ascertain for his clients.
"It's been a hidden secret as to what exactly they're looking at from a metrics or supporting information perspective," Miller said.
He notes that forgiveness applications among his clients for loans under $2 million have been getting processed within a few weeks. But for the hundreds of clients he has with loans above $2 million, he's only seen a single application get through the process, which was approved.
"I can't say that ratio is true for everybody, but it's taking a long time," Miller said.
The longer that timeline takes, the more uncertainty there is for contractors, particularly those whose applications are ultimately denied.
Long processing times
AGC sued SBA last year when the agency retroactively required applicants seeking forgiveness for loans of greater than $2 million to answer a necessity questionnaire, and the two parties are currently in settlement negotiations. After the suit was filed, SBA disclosed more information about the questionnaire, how it was developed and instructions for filling it out.
But now, Kennedy says AGC's concerns have grown beyond just the questionnaire, because long processing times mean contractors have to carry loans as a liability on their balance sheets until a decision is made.
"It's already having a financial impact on the companies that are waiting for forgiveness," Kennedy said. "We have reason to believe that it's impacting contractors' bonding capacity, we have reason to suspect that it's impacting contractors' credit ratings."
He also claimed SBA has hired a third-party private firm to help process applications.
"That may not be a problem if you simply have a private contractor managing the paperwork," Kennedy said. "But if this private company is making subjective determinations about whether contractors acted in good faith, that starts to raise questions."
SBA provides data on its website about applications and overall dollar amounts forgiven. But it doesn't break down forgiveness rates for loans above $2 million, or how it determines eligibility. Kennedy said it is unusual for a public agency to not disclose its decision-making criteria.
"That kind of guidance is typically released by all kinds of government agencies, because it provides the regulated community with insight into what is expected of them," said Kennedy.
Waiting for answers
Miller noted that many clients waited for guidance on the types of expenses covered by the loans that would still be tax deductible, which wasn't issued until late December.
"So in January, the floodgates opened and a lot of our clients submitted," Miller said. "But now we're going on three to four months and they still haven't gotten an answer."
While Miller noted having the loans on contractors' balance sheets can be an issue when seeking bonding, one solution is for contractors to adopt the International Accounting Standards Board IAS 20 Standard, as compared to U.S. GAAP standards, which allows companies to treat the loans as government grants, if they reasonably expect them to be forgiven.
"You're basically treating it as a forgivable government grant, so formal forgiveness is not necessary," Miller said.