Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • SBA unveils enhanced Lender Match tool to connect small businesses with lenders

    Federal Issues

    On March 4, the SBA announced the launch of an online tool for small businesses to connect to capital through the SBA’s network of nearly 1,000 approved banks and private lenders. This Lender Match tool was designed to provide users with a more effective and user-friendly interface, including a mobile-friendly interface that allows small business entrepreneurs and enterprises seeking to grow businesses to more easily identify and compare potential lenders. The tool also included fraud-screening measures to ensure a smoother process for both parties. Small businesses that are unable to find a match through the tool will be directed to the SBA’s local advisors for additional support in becoming “capital-ready.” The SBA hopes to facilitate more connections for entrepreneurs looking for various financing options through the enhanced Lender Match platform including microloans and growth capital with competitive terms.

    Federal Issues SBA Consumer Finance Small Business

  • FinCEN issues FAQs on PPP

    Federal Issues

    On January 12, FinCEN and the SBA issued FAQs on the Paycheck Protection Program (“PPP”), established under the CARES Act, to assist borrowers and lenders in interpreting the CARES act and the PPP Interim Final Rule. Among the issues addressed in the FAQs, FinCEN and the SBA provided guidance regarding whether under the CDD Rule, lenders are required to collect, certify, or verify beneficial ownership information for existing customers, stating that it is not necessary to re-verify “[i]f the PPP loan is being made to an existing customer, and the existing customer and the necessary information was previously verified. Additionally, FinCEN and the SBA addressed the question of whether a lender’s collection of the information required with respect to owners of 20% or greater interest in PPP applicants is sufficient to satisfy a lender’s obligation to collect beneficial ownership information under the Bank Secrecy Act. FinCEN and the SBA stated that for lenders with existing customers the lender does not need to reverify beneficial ownership information for owners that hold ownership interests of at least 20 percent, and with respect to new customers with the same ownership interest, all natural persons will need to provide the same information in order to satisfy BSA requirements. FinCEN also answered more FAQs on its April 2020 FAQs regarding the PPP on Second Draw PPP Loans, on BSA/AML compliances, and on SBA Procedural Notice 5000-835955, the last stating that a “PPP lender may reveal the existence of a SAR to the SBA when requesting a guaranty purchase (without charge-off) from the SBA.” 

    Federal Issues SBA FinCEN Department of Treasury PPP CARES Act Bank Secrecy Act Anti-Money Laundering Act of 2020

  • SBA issues new SBLC licenses for the first time in 40 years

    Federal Issues

    On November 1, the SBA announced that three new Small Business Lending Company (SBLC) licenses have been issued to lenders focused on underserved markets, which is notably the first expansion of the SBLC program in more than 40 years. An SBLC license permits lending institutions to leverage government guarantees during the process of approving small business loans, decreasing risk for the lender, and lowering costs for the borrower. Consequently, SBA noted, SBLCs can extend a greater number of loans to small businesses than would be feasible without government support. The announcement stated that SBA's current SBLCs surpass banks and credit unions in their ability to provide loans to minority-owned businesses.

    In June, the SBA opened a window for new applications for lenders. In announcing the new licensees, SBA Administrator Isabel Guzman stated that “[w]ith the addition of three new Small Business License Companies, the SBA will be able to serve even more small business owners who need capital to start, operate, and grow their businesses.” The SBA highlighted that “[e]ach of the three new SBLC license holders will focus on historically underserved markets, including small businesses in Native, rural, and low-income communities.”

    Federal Issues SBA Nonbank Consumer Finance Peer-to-Peer Loans Small Business Lending Biden Licensing

  • SBA offers disaster assistance to businesses and residents

    Federal Issues

    On August 16, the Small Business Administration (SBA) announced the availability of low-interest disaster loans available to businesses and residents across the nation.

    • Mississippi – In light of damage from severe storms, straight-line winds, and flooding that occurred between June 14-19, certain private non-profit businesses (PNP) that do not provide critical services of a governmental nature are eligible to apply for low-interest disaster loans. PNP organizations may borrow up to $2 million with an interest rate of 2.375% to repair or replace damage. SBA is also offering economic injury disaster loans to help meet the needs of PNP organizations. The filing deadline is Oct 11, and the deadline to submit economic injury applications is May 13, 2024.
    • Illinois – Following the announcement of the presidential disaster declaration due to severe storms and flooding June 29-July 2, SBA is offering affected businesses and residents in Illinois low-interest loans. SBA detailed that disaster loans up to $500,000 are available to homeowners to replace or repair damage, and “[i]nterest rates are as low as 4% for businesses, 2.375% for nonprofit organizations, and 2.5% for homeowners and renters, with terms up to 30 years.” The filing deadline is Oct 16, and the deadline to submit economic injury applications is May 13, 2024.
    • New Jersey – In light of damage from severe storms and flooding that occurred June 14-19, certain PNP organizations that do not provide critical services of a governmental nature are eligible to apply for low-interest disaster loans. PNP organizations may borrow up to $2 million with an interest rate of 2.375% with terms up of to 30 years to repair or replace damage. SBA is also offering economic injury disaster loans to help meet the needs of PNP organizations. The filing deadline is Oct 10, and the deadline to submit economic injury applications is May 13, 2024.
    • Oklahoma – SBA is making low-interest federal disaster loans available for certain PNP organizations in certain counties following the announcement of the presidential disaster declaration. PNP organizations may borrow up to $2 million with an interest rate of 2.375% with terms of up to 30 years to repair or replace damage. “SBA can also lend additional funds to help with the cost of improvements to protect, prevent or minimize the same type of disaster damage from occurring in the future.”

    Federal Issues SBA Disaster Relief Loans Consumer Finance Small Business Lending

  • OCC allows Hawaii institutions to temporarily close, SBA offers loans

    On August 10, the OCC issued a proclamation permitting OCC-regulated institutions to close offices in areas affected by the wildfires in Hawaii. In issuing the proclamation, the OCC noted that only bank offices directly affected by potentially unsafe conditions should close, and that institutions should make every effort to reopen as quickly as possible to address customers’ banking needs. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions.

    In addition, the Small Business Association (SBA) announced that it is offering low-interest federal disaster loans to Hawaii businesses and residents and California businesses and residents affected by the severe winter storms, straight-line winds, flooding, landslides and mudslides that occurred February 21 – July 10. 

    Interest rates for these loans can be as low as 4% for businesses, 2.375% for private nonprofit organizations and 2.375% (2.5% for Hawaii) for homeowners and renters with terms up to 30 years. Loan amounts and terms are set by SBA and are based on each applicant’s financial condition, with loans up to $500,000 for homeowners to repair or replace damaged or destroyed real estate and $100,000 to repair or replace damaged or destroyed personal property, including personal vehicles. The loans are part of the SBA’s commitment to “providing federal disaster loans swiftly and efficiently, with a customer-centric approach to help businesses and communities recover and rebuild.”

    Find continuing InfoBytes coverage on disaster relief here.

    Bank Regulatory Federal Issues OCC Hawaii California SBA Disaster Relief Consumer Finance

  • Biden Administration to improve small business loan program

    Federal Issues

    On August 1, the SBA announced implementation of additional policies aimed at expanding small business’ access to capital by modernizing SBA’s signature 7(a) and 504 Loan Programs. The new simplified guidelines for lenders include updated origination policies and procedures, lender participation requirements, and 7(a) loan servicing and liquidation requirements. SBA has also clarified affiliation standards to effectively communicate who qualifies for SBA loans, will use technology updates to bring eligibility determinations in-house, and will also use advanced data analytics and third-party data checks for fraud review on all loan programs before approval.

    The following three SBA SOPs took effect on August 1, bringing many of the new policies into practice:

    Finally, the SBA will begin accepting the Universal Purchase Package, a new feature that is expected to streamline the process for lenders to request SBA honor its loan guaranty. SBA will also introduce new features in E-TRAN, SBA’s online platform used by lenders to upload loan applications.

    Federal Issues Agency Rule-Making & Guidance SBA Biden CFPB Small Business Lending

  • SBA clarifies PPP eligibility of payroll costs

    Federal Issues

    On June 13, the SBA added question #72 to its Paycheck Protection Program (PPP) Frequently Asked Questions clarifying whether “the amounts paid by a borrower to a third-party payer for the third-party payer’s employees to operate the borrower considered eligible payroll expenses for the purpose of calculating the maximum loan amount.” Previous guidance released in 2020 (FAQ #10) relayed that “payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation.” However, because FAQ #10 was issued three days after the PPP began accepting applications and there have been conflicting interpretations of the guidance, the SBA administrator determined additional clarification was necessary.

    After reviewing a September 2022 decision issued by the SBA Office of Hearings and Appeals, the administrator published FAQ #72, stating “payroll costs paid by a borrower to a third-party payer for the third-party’s employees to operate the borrower are eligible payroll costs for the purpose of calculating the borrower’s maximum loan amount, as long as the employees were not otherwise counted towards payroll costs on a PPP loan received by the third-party payer.” The administrator further explained that “payroll cost documentation which shows that a borrower paid a third-party payer for the employees of the third-party to operate the borrower will be permitted to support eligible payroll costs for the purpose of calculating the maximum loan amount as long as the employees were not otherwise counted towards payroll costs on another PPP loan, and all other PPP requirements are met, including the submission of payroll documentation that indicates the amount of wages and payroll taxes reported to the IRS by the third-party payer.”

    Federal Issues SBA Covid-19 CARES Act Small Business Lending

  • SBA creates new SBLC category and ends moratorium

    Agency Rule-Making & Guidance

    On April 12, the SBA published a final rule in the Federal Register lifting the moratorium on licensing new nondepository small business lending companies (SBLCs) and adding a new type of entity called a “Community Advantage SBLC.” The moratorium was imposed in 1982, after the agency determined it lacked adequate resources to effectively service and supervise additional SBLCs participating in SBA’s 7(a) loan program beyond the 14 it was authorized to approve. According to SBA, while the majority of 7(a) lenders are federally-regulated depository institutions, “SBLCs are regulated, supervised, and examined solely by SBA” and “are subject to specific regulations regarding formation, capitalization, and enforcement actions.” SBA explained that there are capital market gaps in certain markets that “continue to struggle to obtain financing on non-predatory terms.” The final rule lifts the licensing moratorium and eliminates the cap on the number of nondepository institutions in the program. The final rule also creates the Community Advantage SBLC to help bridge the financing gap that small businesses face in the private market. Community Advantage SBLCs are nonprofit organizations that will be licensed to make 7(a) loans to small businesses and will help SBA meet the needs of underserved communities. SBA also revised its regulations to remove the requirement for a separate loan authorization document to “eliminate the duplication of effort and opportunity for a mismatch of information between multiple sources of the loan terms and conditions.” The final rule is effective May 12.

    Agency Rule-Making & Guidance Federal Issues SBA Small Business Lending Nondepository

  • HUD seeks public input on disaster recovery funds

    Agency Rule-Making & Guidance

    On December 20, HUD released two new requests for information (RFIs) seeking public input on how to simplify, modernize, and more equitably distribute critical disaster recovery funds. According to HUD, the RFIs are a broader element of HUD’s newly published Climate Action Plan, “which emphasizes both equity and resilience in disaster recovery, as well as the Biden-Harris Administration’s commitment to strengthening low- and moderate-income communities.” HUD noted that the Community Development Block Grant Disaster Recovery and Mitigation focus on long-term recovery and resilience efforts, targeted to families with low- and moderate-incomes in the most impacted and distressed areas. HUD also noted that both funds are “unique” from other federal disaster assistance programs by FEMA and the SBA, as well as private insurance, because it is the only federal resource with the primary purpose of benefiting low- and moderate-income communities. HUD further noted that the RFIs will inform the policy that will tear down barriers and eliminate unnecessary administrative burden, as to provide better and quicker assistance to those affected.

    Agency Rule-Making & Guidance Federal Issues HUD Disaster Relief SBA

  • SBA seeks to end SBLC moratorium

    Agency Rule-Making & Guidance

    On November 7, SBA published a proposed rule in the Federal Register seeking to lift the moratorium on licensing new small business lending companies (SBLCs) and adding a new type of entity called a “Mission-Based SBLC.” The moratorium was imposed in 1982, after the agency lacked adequate resources to effectively service and supervise additional SBLCs participating in SBA’s 7(a) loan program beyond the 14 it was authorized to approve. According to SBA, while the majority of 7(a) lenders are federally-regulated depository institutions, “SBLCs are regulated, supervised, and examined solely by SBA” and “are subject to specific regulations regarding formation, capitalization, and enforcement actions.” SBA explained that there are capital market gaps in certain markets that “continue to struggle to obtain financing on non-predatory terms.” The proposed rule seeks to lift the licensing moratorium and further create the Mission-Based SBLC to help bridge the financing gap. Mission-Based SBLCs will be nonprofit entities that will help SBA meet the needs of underserved communities and increase opportunities for access to capital in precisely targeted capital market gaps. Comments on the proposed rule are due January 6, 2023.

    Agency Rule-Making & Guidance Federal Issues SBA Fintech Small Business Lending

Pages

Upcoming Events