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Financial Services Law Insights and Observations

SBA guidance addresses unresolved First Draw PPP loans

Federal Issues SBA Covid-19 CARES Act Economic Aid Act

Federal Issues

Recently, the Small Business Administration (SBA) issued a procedural notice informing lenders that the Paycheck Protection Program (PPP) platform will begin processing new Second Draw PPP loan guarantee applications for borrowers who still have unresolved issues related to their First Draw loans. Second Draw submissions for unresolved borrowers will automatically be moved to a “research status,” providing opportunities for lenders to submit necessary documentation to support the resolution of outstanding First Draw issues. Information concerning the unresolved issues and resolution assistance will also be provided by SBA. Once outstanding First Draw issues are resolved, Second Draw loan applications will automatically be submitted into the next processing stage and will not require re-entry by the lender. However, if an outstanding First Draw issue cannot be resolved, lenders should withdraw a borrower’s Second Draw application from the platform. SBA notes that if a Second Draw application submitted before January 27 was rejected due to an unresolved First Draw issue, the lender should resubmit the application. SBA also issued several other procedural notices related to provisions under the Economic Aid Act (covered by InfoBytes here) that address, among other things, modifications to SBA’s 7(a) loan program, the elimination of certain 504 loan program fees, and a notice to lenders that SBA has informed eligible borrowers of available Section 1112 CARES Act assistance.

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