The Small Business Administration (“SBA”) has just provided more information with respect to the Paycheck Protection Program (“PPP”) by way of Interim Final Rule. This new “guidance” demonstrates once again how fluid the current regulatory environment has become as adjustments are being made on a daily basis.
The most notable change for borrowers is an increase in rate from the initially published 0.5% to 1%. The Interim Final Rule provides additional clarity for lenders in relation to the loan application and loan forgiveness verification requirements. Importantly, lenders may rely on certifications of the borrower in order to determine eligibility of the borrower and use of loan proceeds and to rely on specified documents provided by the borrower to determine qualifying loan amount and eligibility for loan forgiveness. An overview of changes to previous guidance and additional requirements included in the Interim Final Rule is provided below:
Notable Borrower Information
· Interest rate increased from 0.5% to 1%
· PPP loans are “first come, first-served”
· Borrower’s must submit SBA Form 2483 (Paycheck Protection Application Form)
Lender Underwriting Responsibilities
· Confirm receipt of borrower certifications in Paycheck Protection Program Application;
· Confirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020;
· Confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application; and
· Follow applicable Bank Secrecy Act requirements.
Each lender’s underwriting obligation under the PPP is limited to the items above and reviewing the Paycheck Protection Application Form. Borrowers must submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.
The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs. The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower.
For any questions about, or to discuss, the Paycheck Protection Program, contact the following Riley Riper Hollin & Colagreco attorneys: Edward J. Hollin, Robert A. Cohen, Jonathan A. Jordan, or Jeff Cronin.