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Financial Services Law Insights and Observations

SBA releases PPP guidance as portal reopens

Federal Issues SBA CARES Act Covid-19

Federal Issues

On January 19, the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) loan portal re-opened to all participating lenders (covered by InfoBytes here). To assist lenders, the SBA released an interim final rule, consolidating prior rules related to PPP loan forgiveness and incorporating changes made by the Economic Aid Act. The interim final rule also addresses conflict of interest provisions and related disclosure requirements, and applies to PPP loans for which loan forgiveness payments have not been remitted by the SBA as of December 27, 2020. To assist lenders, the SBA also issued a set of frequently asked questions addressing how to calculate revenue reduction and maximum loan amounts for Second Draw PPP loans, as well as documents borrowers must provide to substantiate their calculations. The SBA reiterated that borrowers and lenders may rely on this guidance as the agency’s interpretation of the CARES Act, the Economic Aid Act and the PPP interim final rules (covered by InfoBytes here), emphasizing that the “government will not challenge lender PPP actions that conform to this guidance and to the PPP interim final rules and any subsequent rulemaking in effect at the time the action is taken.”

In preparation for the re-opening, the SBA also released guidance for lenders on calculating the maximum amount for First Draw PPP loans. The guidance outlines documentation requirements for different types of businesses, and advises lenders handling second-draw loans to make sure the loan number for a borrower’s first-draw PPP loan is included on the second-draw application. The SBA also released two procedural notices. The first notice informs PPP lenders of the process for borrower resubmission of loan forgiveness applications (see SBA Form 3508S, SBA Form 3508EZ, and PPP Loan Forgiveness Calculation Form, all revised January 19), as well as lender responsibilities for notifying borrowers of lender and SBA decisions to approve or deny forgiveness in full or in part. The notice also discusses the process for remitting any portion of the loan forgiveness amount by the SBA to the lender, along with offsets of remittances to lenders to cover a lender’s outstanding debts. The second notice addresses PPP excess loan amount errors, and clarifies that borrowers may not receive forgiveness for excess loan amounts, even if “the excess loan amount was caused by borrower error or lender error.”