Forgiveness Plans for PPP Loans Proving to be Perplexing

Royal Bank in Lancaster made $23.5 million in Payroll Protection Program forgivable loans after the federal stimulus initiative was quickly created in March to help small businesses and workers survive the economic havoc of the coronavirus crisis. 

Even though it was hectic processing 520 loans in a short time, lending turned out to be the easy part, said Jeff Gruetzmacher, a senior vice president for Royal Bank. 

The hard part? Six months later, getting clarity from the U.S. Small Business Administration about the forgiveness feature of the PPP loans.  

“It’s so complicated most accountants can’t even figure it out, let alone bankers who are trying to wade through payroll reports and tax filings for payrolls and such,” said Gruetzmacher.  “It really has become unwieldly in how we’re supposed to deal with the forgiveness part. The rules are so complex, the documentation is very obtuse. They think it’s clear, but it’s about as clear as mud.” 

Gruetzmacher isn’t the only one who feels that way. Even though Wisconsin bankers generally praise the program for coming together rapidly and helping small businesses during a fearfully intense period of the economic shutdown prompted by the pandemic, a lot of them are frustrated by the forgiveness stage. That means many PPP loans are likely to remain on the books longer than expected.  

The possibility that the SBA will grant automatic PPP loan forgiveness to businesses that borrowed $150,000 or less – an approach many bankers favor – has left some wondering whether they should start the complex forgiveness application process or wait for the potentially simpler procedure. There is legislation in the U.S. Senate and House of Representatives (S.4117 and H.R.7777, respectively) that would allow forgiveness of a $150,000-or-less PPP loan if the borrower files a one-page form. 

Bankers also wonder whether the SBA intends to use the full 90 days allowed for the agency to review and process forgiveness applications. That, in turn, has left them trying to figure out how long the PPP loans will be on the books. 

“We’ve been waiting on a bill that was presented in Congress that would essentially give automatic forgiveness to loans under $150,000, which is a pretty decent chunk of our PPP loans,” said Ami Myrland, senior vice president and chief financial officer of Capitol Bank in Madison. 

Myrland said it appears legislation has stalled as national elections draw near. 

“So unfortunately for our borrowers that means that we don’t have a lot of really good information about what the forgiveness looks like,” she said. 

Myrland said she’s hearing banks that have helped borrowers apply for forgiveness are being told they’ll need to wait the entire 90-day processing period. 

“We’ve told our customers that we’re not quite ready to process those forgiveness applications because we don’t feel we’re doing them a service at that point,” Myrland said. “We want to wait for more clear guidance so that they can have that automatic forgiveness should it come through, which would save both them and us time, hopefully.” 

Wausau-based Peoples State Bank booked about $116 million in PPP loans. Mark Oldenberg, senior vice president and CFO, said the timing of the forgiveness element of PPP isn’t what he expected.   

“It was kind of billed like you would put the loans on and they’ll be off your books this year yet, and you would recognize all of the income. Now I would tell you I think we’re only going to see 10 or 20 percent of our loan forgiveness this year, and most of it’s going to be next year,” Oldenberg said. 

In all, through Aug. 8, there were 89,615 PPP loans totaling more than $9.9 billion issued in Wisconsin. About 73,000 of the loans were for less than $150,000. 

Scott Ducke, executive vice president and chief lending officer at State Bank of Cross Plains, said his financial institution quickly closed about 1,100 PPP loans shortly after the program began, totaling about $110 million.  

“We usually close about 100 commercial loans roughly a month,” Ducke said. “To do 1,100 in 30 or 45 days was like drinking from a fire hose – as a lot of community banks did that month.” 

Banks worked hard and quickly to book PPP loans to help their customers and new borrowers make it through the downturn, said attorney John T. Reichert, shareholder in the banking and finance practice of Reinhart Boerner Van Deuren in Milwaukee. 

“Many of these banks were doing a year’s worth of volume within two months,” he said. 

Reinhart attorney Sara McNamara, who has been assisting banks with PPP lending issues, said automatic forgiveness for borrowers of $150,000 or less would go a long way toward easing the process. 

“It would have a pretty significant effect, especially for the community banks,” she said. “I was talking to a client yesterday who said they had like 600 PPP loans under $150,000 and less than 100 over ($150,000), so particularly for some of those smaller banks the change would be very helpful.” 

She said borrowers and bankers want to know whether the blanket forgiveness for loans of less than $150,000 is coming, and if so, when. 

“I think a lot of businesses are kind of getting frustrated and they want to get the loan off their books, and are starting to get to the place where they are saying. ‘Hey maybe we should just start with the process as it is now because who knows when or if this will come from the SBA,’” McNamara said. 

Asked by Wisconsin Banker Daily about the concerns of state bankers, Robert Scott, regional administrator for Region V of the SBA, said, “Lending institutions should begin to prepare for the PPP loan forgiveness timeline.” 

“There are a number of bills simplifying PPP forgiveness for under $150k; none have yet to be voted on,” Scott said in a written statement. “Hopefully, Congress will weigh in soon on the matter.” 

Not knowing whether automatic forgiveness for smaller loans is coming makes it hard to say what percent of PPP loans still are going to be on the books of Wisconsin banks at the end of 2020, said McNamara. 

“It depends on how quickly the SBA moves,” she said. “A lot of borrowers are going to want to wait to see if anything comes out further. Something could come out next week or it could be two months from now, or we could hear nothing.”  

Ducke said State Bank of Cross Plains anticipated that 75% or more of its PPP loans would be forgiven by the end of the year, but it doesn’t look like that will happen. 

“We will be surprised if 20% are going to be forgiven by the end of the year at this point,” Ducke said. “If that $150,000 (automatic forgiveness) would come into play, it would certainly alter that percentage. But we’re trying to be conservative and realistic based on the scenarios we’ve been handed thus far.” 

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years. Have a story idea? Contact him at 

By, Ally Bates