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Financial Services Law Insights and Observations

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  • SBA announces $5 billion in Covid-19 aid for small businesses

    Federal Issues

    On April 23, the Small Business Administration (SBA) announced a new round of Economic Injury Disaster Loan (EIDL) assistance to provide $5 billion in additional assistance to small businesses and nonprofit organizations with 10 employees or fewer that have been severely affected by the Covid-19 pandemic. The Supplemental Targeted Advance program is the latest SBA relief program and follows recent SBA actions taken to increase EIDL assistance. As previously covered by InfoBytes, last month SBA raised the loan limit for Covid-19 disaster loans “from 6-months of economic injury with a maximum loan amount of $150,000 to up to 24-months of economic injury with a maximum loan amount of $500,000,” and extended the deferment period for all disaster loans, including Covid-19 EIDLs, until 2022 (covered by InfoBytes here).

    Federal Issues SBA Covid-19 Small Business Lending EIDL

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  • SBA updates deadlines for first-draw PPP loans

    Federal Issues

    On April 19, the Small Business Administration (SBA) issued an updated procedural notice to lenders related to Paycheck Protection Program (PPP) deadlines following the enactment of the PPP Extension Act of 2021 (covered by InfoBytes here). SBA reiterates that under the PPP Extension Act, “from June 1, 2021 through June 30, 2021, SBA shall not accept new PPP Loan guaranty applications from Lenders and shall only process PPP Loan guaranty applications submitted by Lenders to SBA before June 1, 2021.” The updated procedural notice modifies a previously issued notice concerning First Draw PPP loan increases (covered by InfoBytes here), and addresses (i) requests for increased first draws on unforgiven PPP loans approved before August 8, 2020, for eligible partnerships, seasonal employers, and farmers or ranchers; (ii) reapplications by eligible borrowers that fully repaid a first-draw PPP loan prior to December 27, 2020; (iii) re-disbursements to eligible borrowers that returned part of a first-draw PPP loan prior to December 27, 2020; (iv) increases for eligible borrowers that did not accept the full amount of a first-draw PPP loan approved on or before August 8, 2020; and (v) hold codes for unresolved borrowers.

    Federal Issues SBA Covid-19 Small Business Lending

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  • SBA clarifies bankruptcy PPP eligibility

    Federal Issues

    On April 6, the Small Business Administration (SBA) updated its Paycheck Protection Program (PPP) frequently asked questions to clarify when an applicant or owner is no longer considered to be “presently involved in any bankruptcy” for PPP loan eligibility purposes. In order to be eligible for a PPP loan, SBA requires all borrowers to certify on their applications that the applicant, as well as any owner of 20 percent or more of the applicant, is not “presently involved in any bankruptcy.” SBA’s FAQ provides that “[i]f an applicant or owner has filed a Chapter 7 bankruptcy petition, the applicant or owner is considered to be ‘presently involved in any bankruptcy’ for PPP eligibility purposes until the Bankruptcy Court has entered a discharge order in the case.” For Chapter 11, 12, or 13 bankruptcy petitions, the applicant or owner will be “considered to be ‘presently involved in any bankruptcy’ for PPP eligibility purposes until the Bankruptcy Court has entered an order confirming the plan in the case.” An applicant or owner will not be considered to be “presently involved in any bankruptcy” if the Bankruptcy Court has entered an order dismissing the case, regardless of the type of bankruptcy petition. SBA stipulates, however, that the order must be entered before the date of the PPP loan application.

    The SBA also issued a procedural notice to lenders announcing it will shut down the PPP platform to new PPP loan guaranty applications at 12 a.m. EDT on June 1.

    Federal Issues SBA Covid-19 Small Business Lending Bankruptcy

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  • Biden extends PPP deadline

    Federal Issues

    On March 30, President Biden signed the PPP Extension Act of 2021, extending the covered period for the Paycheck Protection Program from March 31 to June 30. However, new loan applications will not be accepted after May 31. 

    Federal Issues SBA Covid-19 Small Business Lending CARES Act

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  • SBA gives guidance on PPP loan-error codes

    Federal Issues

    On March 29, the Small Business Administration (SBA) issued an updated procedural notice to lenders providing instructions on Paycheck Protection Program (PPP) loan error codes. The notice revises guidance provided in a previously issued procedural notice (covered by InfoBytes here) and addresses (i) Second Draw PPP loan guaranty applications where there is a hold code on the borrower’s First Draw PPP loan, as well as (ii) First Draw PPP loan guaranty applications and Second Draw PPP loan guaranty applications with compliance check error messages. The updates address compliance check error messages related to disqualifying criminal history, delinquent or defaulted federal student loan restrictions, and updated lender certification.

    Federal Issues SBA Covid-19 Small Business Lending CARES Act

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  • SBA increases lending limit for Covid-19 EIDL program

    Federal Issues

    On March 24, the Small Business Administration (SBA) announced that the maximum amount small businesses and non-profit organizations can borrow through its Covid-19 Economic Injury Disaster Loan (EIDL) program will increase beginning the week of April 6. According to the announcement, SBA will raise the loan limit for Covid-19 disaster loans “from 6-months of economic injury with a maximum loan amount of $150,000 to up to 24-months of economic injury with a maximum loan amount of $500,000.” New loan applications, as well as loans-in-process when the increase takes effect “will automatically be considered” for the new maximum loan limit. This change follows SBA’s announcement earlier this month, which extended the deferment period for all disaster loans, including Covid-19 EIDLs, until 2022 (covered by InfoBytes here).

    Federal Issues SBA Covid-19 Small Business Lending EIDL

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  • SBA implements newest PPP changes

    Federal Issues

    On March 22, the SBA published an interim final rule (IFR) implementing recent changes to the Paycheck Protection Program (PPP) that were included in the American Rescue Plan Act of 2021, enacted on March 11 (covered by InfoBytes here). These changes include “expanding the eligibility for First- and Second-Draw PPP loans, revising the exclusions from payroll costs for purposes of loan forgiveness, and providing that a PPP borrower that receives a PPP loan after December 27, 2020 can be approved for a Shuttered Venue Operator Grant [(SVOG)] under certain conditions.” Specifically, if a borrower received a First- or Second-Draw PPP loan after December 27, 2020, the amount of the subsequently approved SVOG will be reduced by the amount of the PPP loan. However, if a PPP applicant is approved for an SVOG before SBA issues a PPP loan number, the applicant will be ineligible for the PPP loan and “acceptance of any PPP loan proceeds will be considered an unauthorized use.” The IFR also provides several other clarifications and changes, which will apply to PPP loans approved, as well as loan forgiveness applications submitted, on or after March 11, 2021. The IFR took effect March 18. To assist SVOG applicants, SBA announced the launch of a splash page for the SVOG application portal, which will begin accepting applications April 8.

    Earlier on March 18, SBA also released the following updated forms: (i) PPP loan guaranty application for lenders; (ii) Second-Draw loan guaranty lender application; (iii) First-Draw and Second-Draw PPP loan application forms; and (iv) First-Draw and Second-Draw PPP borrower applications for Schedule C filers using gross income.

    Federal Issues SBA Covid-19 American Rescue Plan Act of 2021 Small Business Lending

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  • SBA defers all disaster and EIDL loans until 2022

    Federal Issues

    On March 12, the Small Business Administration (SBA) extended the deferment period for all disaster loans, including the Covid-19 Economic Injury Disaster Loan (EIDL) program, until 2022. Specifically, the first payment due date for SBA disaster loans made in calendar year 2020 is extended from 12-months to 24-months from the date of the note. SBA disaster loans made in calendar year 2021 will have their first payment due date extended from 12-months to 18-months from the date of the note. SBA notes that existing SBA disaster loans approved before 2020 that were in regular servicing status of March 1, 2020 (and that previously had received an extended initial deferment period through March 31), will automatically be granted an additional 12-month deferment of principal and interest payments. SBA stresses, however, that interest will continue to accrue on outstanding loan balances through the duration of the deferment.

    Federal Issues SBA Covid-19 Small Business Lending CARES Act EIDL

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  • Biden extends Covid-19 regulatory relief

    Federal Issues

    On March 11, President Biden signed the American Rescue Plan Act of 2021 (the Act), which will, among other things, extend certain emergency authorities and temporary regulatory relief contained in the CARES Act to address the continued impact of the Covid-19 pandemic. Under a section titled, “Committee on Small Business and Entrepreneurship,” the Act will provide an additional $7.25 billion for the Paycheck Protection Program (PPP), extend the eligibility of certain nonprofit entities for covered loans under the PPP, and amend certain aspects of the program allowing for certain businesses to take second loans. However, the Act does not actually extend the PPP, which is currently set to expire on March 31 (covered by InfoBytes here). The Act also allocates nearly $10 billion through the Homeowner Assistance Fund to allow eligible entities to provide direct assistance for mortgage payments, property insurance, utilities, and other housing-related costs to help prevent delinquencies, defaults, and foreclosures. Moreover, a provision related to fair housing activities provides $20 million “to ensure fair housing organizations have additional resources to address fair housing inquiries, complaints, investigations, and education and outreach activities, and costs of delivering or adapting services, during or relating to the coronavirus pandemic.” Additionally, the Act provides $15 billion for Economic Injury Disaster Loan (EIDL) advance payments, including $5 billion for supplemental targeted EIDL advance payments for the hardest hit.

    In addition to providing Covid-19 relief, the Act also includes, among other things, a section that modifies the treatment of student loan forgiveness. Specifically, Section 9675 will exclude from gross income any amount of student loan debt that is modified or discharged (in whole or in part) after December 31, 2020, and before January 1, 2026. The tax exemption will include federal, private, and institutional loans. According to a press release issued by Senators Bob Menendez (D-NJ) and Elizabeth Warren (D-MA), the provision is intended to “ensur[e] borrowers whose debt is fully or partially forgiven are not saddled with thousands of dollars in surprise taxes.”

    Federal Issues Federal Legislation Covid-19 Biden CARES Act SBA EIDL Student Lending American Rescue Plan Act of 2021

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  • SBA changes income calculations for self-employed PPP applicants

    Federal Issues

    On March 12, the Small Business Administration (SBA) updated its Paycheck Protection Program (PPP) frequently asked questions to reflect recent changes allowing self-employed, Schedule C filers to use gross income to calculate PPP loan amounts. As previously covered by InfoBytes, SBA issued an interim final rule earlier this month implementing the calculation change for loans approved after March 4, 2021. The new FAQ includes options for lenders assisting filers who already applied for a PPP loan but who now want to use gross income to calculate their loan amount. Although some filers may update their calculation, SBA’s guidance states that if a lender “has disbursed the loan and filed the related Form 1502 Report reporting disbursement of the loan, no changes can be made to the loan amount calculation.” Additionally, SBA issued updated guidance on maximum loan amount calculations for First Draw PPP loans, as well as revenue reduction and maximum loan amount calculations for Second Draw PPP loans.

    Federal Issues SBA Covid-19 Small Business Lending

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