Business Loan Program Temporary Changes; Paycheck Protection Program, 20811-20817 [2020-07672]
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20811
Rules and Regulations
Federal Register
Vol. 85, No. 73
Wednesday, April 15, 2020
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket No. SBA–2020–0015]
RIN 3245–AH34
Business Loan Program Temporary
Changes; Paycheck Protection
Program
U.S. Small Business
Administration.
ACTION: Interim final rule.
AGENCY:
This interim final rule
announces the implementation of
sections 1102 and 1106 of the
Coronavirus Aid, Relief, and Economic
Security Act (CARES Act or the Act).
Section 1102 of the Act temporarily
adds a new product, titled the
‘‘Paycheck Protection Program,’’ to the
U.S. Small Business Administration’s
(SBA’s) 7(a) Loan Program. Section 1106
of the Act provides for forgiveness of up
to the full principal amount of
qualifying loans guaranteed under the
Paycheck Protection Program. The
Paycheck Protection Program and loan
forgiveness are intended to provide
economic relief to small businesses
nationwide adversely impacted under
the Coronavirus Disease 2019 (COVID–
19) Emergency Declaration (COVID–19
Emergency Declaration) issued by
President Trump on March 13, 2020.
This interim final rule outlines the key
provisions of SBA’s implementation of
sections 1102 and 1106 of the Act in
formal guidance and requests public
comment.
SUMMARY:
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DATES:
Effective date: This interim final rule
is effective April 15, 2020.
Applicability date: This interim final
rule applies to applications submitted
under the Paycheck Protection Program
through June 30, 2020, or until funds
made available for this purpose are
exhausted.
Comment Date: Comments must be
received on or before May 15, 2020.
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You may submit comments,
identified by number SBA–2020–0015
through the Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments.
SBA will post all comments on
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at www.regulations.gov, please
send an email to ppp-ifr@sba.gov.
Highlight the information that you
consider to be CBI and explain why you
believe SBA should hold this
information as confidential. SBA will
review the information and make the
final determination whether it will
publish the information.
FOR FURTHER INFORMATION CONTACT: Call
Center Representative at 833–572–0502,
or the local SBA Field Office; the list of
offices can be found at https://
www.sba.gov/tools/local-assistance/
districtoffices.
SUPPLEMENTARY INFORMATION:
ADDRESSES:
I. Background Information
On March 13, 2020, President Trump
declared the ongoing Coronavirus
Disease 2019 (COVID–19) pandemic of
sufficient severity and magnitude to
warrant an emergency declaration for all
states, territories, and the District of
Columbia. With the COVID–19
emergency, many small businesses
nationwide are experiencing economic
hardship as a direct result of the
Federal, State, and local public health
measures that are being taken to
minimize the public’s exposure to the
virus. These measures, some of which
are government-mandated, are being
implemented nationwide and include
the closures of restaurants, bars, and
gyms. In addition, based on the advice
of public health officials, other
measures, such as keeping a safe
distance from others or even stay-athome orders, are being implemented,
resulting in a dramatic decrease in
economic activity as the public avoids
malls, retail stores, and other
businesses.
On March 27, 2020, the President
signed the Coronavirus Aid, Relief, and
Economic Security Act (the CARES Act
or the Act) (Pub. L. 116–136) to provide
emergency assistance and health care
response for individuals, families, and
businesses affected by the coronavirus
pandemic. The Small Business
Administration (SBA) received funding
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and authority through the Act to modify
existing loan programs and establish a
new loan program to assist small
businesses nationwide adversely
impacted by the COVID–19 emergency.
Section 1102 of the Act temporarily
permits SBA to guarantee 100 percent of
7(a) loans under a new program titled
the ‘‘Paycheck Protection Program.’’
Section 1106 of the Act provides for
forgiveness of up to the full principal
amount of qualifying loans guaranteed
under the Paycheck Protection Program.
A more detailed discussion of sections
1102 and 1106 of the Act is found in
section III below.
II. Comments and Immediate Effective
Date
The intent of the Act is that SBA
provide relief to America’s small
businesses expeditiously. This intent,
along with the dramatic decrease in
economic activity nationwide, provides
good cause for SBA to dispense with the
30-day delayed effective date provided
in the Administrative Procedure Act.
Specifically, small businesses need to be
informed on how to apply for a loan and
the terms of the loan under section 1102
of the Act as soon as possible because
the last day to apply for and receive a
loan is June 30, 2020. The immediate
effective date of this interim final rule
will benefit small businesses so that
they can immediately apply for the loan
with a full understanding of loan terms
and conditions. This interim final rule
is effective without advance notice and
public comment because section 1114 of
the Act authorizes SBA to issue
regulations to implement Title 1 of the
Act without regard to notice
requirements. This rule is being issued
to allow for immediate implementation
of this program. Although this interim
final rule is effective immediately,
comments are solicited from interested
members of the public on all aspects of
the interim final rule, including section
III below. These comments must be
submitted on or before May 15, 2020.
The SBA will consider these comments
and the need for making any revisions
as a result of these comments.
III. Temporary New Business Loan
Program: Paycheck Protection Program
Overview
The CARES Act was enacted to
provide immediate assistance to
individuals, families, and businesses
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affected by the COVID–19 emergency.
Among the provisions contained in the
CARES Act are provisions authorizing
SBA to temporarily guarantee loans
under a new 7(a) loan program titled the
‘‘Paycheck Protection Program.’’ Loans
guaranteed under the Paycheck
Protection Program (PPP) will be 100
percent guaranteed by SBA, and the full
principal amount of the loans may
qualify for loan forgiveness. The
following outlines the key provisions of
the PPP.
1. General
SBA is authorized to guarantee loans
under the PPP through June 30, 2020.
Congress authorized a program level of
$349,000,000,000 to provide guaranteed
loans under this new 7(a) program. The
intent of the Act is that SBA provide
relief to America’s small businesses
expeditiously, which is expressed in the
Act by giving all lenders delegated
authority and streamlining the
requirements of the regular 7(a) loan
program. For example, for loans made
under the PPP, SBA will not require the
lenders to comply with section 120.150
‘‘What are SBA’s lending criteria?.’’ SBA
will allow lenders to 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. Lenders must comply with
the applicable lender obligations set
forth in this interim final rule, but will
be held harmless for borrowers’ failure
to comply with program criteria;
remedies for borrower violations or
fraud are separately addressed in this
interim final rule. The program
requirements of the PPP identified in
this rule temporarily supersede any
conflicting Loan Program Requirement
(as defined in 13 CFR 120.10).
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2. What do borrowers need to know and
do?
a. Am I eligible?
You are eligible for a PPP loan if you
have 500 or fewer employees whose
principal place of residence is in the
United States, or are a business that
operates in a certain industry and meet
the applicable SBA employee-based size
standards for that industry, and:
i. You are:
A. A small business concern as
defined in section 3 of the Small
Business Act (15 U.S.C. 632), and
subject to SBA’s affiliation rules under
13 CFR 121.301(f) unless specifically
waived in the Act; or
B. A tax-exempt nonprofit
organization described in section
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501(c)(3) of the Internal Revenue Code
(IRC), a tax-exempt veterans
organization described in section
501(c)(19) of the IRC, Tribal business
concern described in section 31(b)(2)(C)
of the Small Business Act, or any other
business; and
ii. You were in operation on February
15, 2020 and either had employees for
whom you paid salaries and payroll
taxes or paid independent contractors,
as reported on a Form 1099–MISC.
You are also eligible for a PPP loan if
you are an individual who operates
under a sole proprietorship or as an
independent contractor or eligible selfemployed individual, and you were in
operation on February 15, 2020.
You must also 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.
SBA intends to promptly issue
additional guidance with regard to the
applicability of affiliation rules at 13
CFR 121.103 and 121.301 to PPP loans.
b. Could I be ineligible even if I meet the
eligibility requirements in (a) above?
You are ineligible for a PPP loan if, for
example:
i. You are engaged in any activity that
is illegal under Federal, state, or local
law;
ii. You are a household employer
(individuals who employ household
employees such as nannies or
housekeepers);
iii. An owner of 20 percent or more
of the equity of the applicant is
incarcerated, on probation, on parole;
presently subject to an indictment,
criminal information, arraignment, or
other means by which formal criminal
charges are brought in any jurisdiction;
or has been convicted of a felony within
the last five years; or
iv. You, or any business owned or
controlled by you or any of your
owners, has ever obtained a direct or
guaranteed loan from SBA or any other
Federal agency that is currently
delinquent or has defaulted within the
last seven years and caused a loss to the
government.
The Administrator, in consultation
with the Secretary of the Treasury (the
Secretary), determined that household
employers are ineligible because they
are not businesses. 13 CFR 120.100.
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c. How do I determine if I am ineligible?
Businesses that are not eligible for
PPP loans are identified in 13 CFR
120.110 and described further in SBA’s
Standard Operating Procedure (SOP) 50
10, Subpart B, Chapter 2, except that
nonprofit organizations authorized
under the Act are eligible. (SOP 50 10
can be found at https://www.sba.gov/
document/sop-50-10-5-lenderdevelopment-company-loan-programs.)
d. I have determined that I am eligible.
How much can I borrow?
Under the PPP, the maximum loan
amount is the lesser of $10 million or
an amount that you will calculate using
a payroll-based formula specified in the
Act, as explained below.
e. How do I calculate the maximum
amount I can borrow?
The following methodology, which is
one of the methodologies contained in
the Act, will be most useful for many
applicants.
i. Step 1: Aggregate payroll costs
(defined in detail below in f.) from the
last twelve months for employees whose
principal place of residence is the
United States.
ii. Step 2: Subtract any compensation
paid to an employee in excess of an
annual salary of $100,000 and/or any
amounts paid to an independent
contractor or sole proprietor in excess of
$100,000 per year.
iii. Step 3: Calculate average monthly
payroll costs (divide the amount from
Step 2 by 12).
iv. Step 4: Multiply the average
monthly payroll costs from Step 3 by
2.5.
v. Step 5: Add the outstanding
amount of an Economic Injury Disaster
Loan (EIDL) made between January 31,
2020 and April 3, 2020, less the amount
of any ‘‘advance’’ under an EIDL
COVID–19 loan (because it does not
have to be repaid).
The examples below illustrate this
methodology.
i. Example 1—No employees make more
than $100,000
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Maximum loan amount is $25,000
ii. Example 2—Some employees make
more than $100,000
Annual payroll: $1,500,000
Subtract compensation amounts in
excess of an annual salary of
$100,000: $1,200,000
Average monthly qualifying payroll:
$100,000
Multiply by 2.5 = $250,000
Maximim loan amount is $250,000
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iii. Example 3—No employees make
more than $100,000, outstanding
EIDL loan of $10,000.
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Add EIDL loan of $10,000 = $35,000
Maximum loan amount is $35,000
iv. Example 4—Some employees make
more than $100,000, outstanding
EIDL loan of $10,000
Annual payroll: $1,500,000
Subtract compensation amounts in
excess of an annual salary of
$100,000: $1,200,000
Average monthly qualifying payroll:
$100,000
Multiply by 2.5 = $250,000
Add EIDL loan of $10,000 = $260,000
Maximum loan amount is $260,000
f. What qualifies as ‘‘payroll costs?’’
Payroll costs consist of compensation
to employees (whose principal place of
residence is the United States) in the
form of salary, wages, commissions, or
similar compensation; cash tips or the
equivalent (based on employer records
of past tips or, in the absence of such
records, a reasonable, good-faith
employer estimate of such tips);
payment for vacation, parental, family,
medical, or sick leave; allowance for
separation or dismissal; payment for the
provision of employee benefits
consisting of group health care coverage,
including insurance premiums, and
retirement; payment of state and local
taxes assessed on compensation of
employees; and for an independent
contractor or sole proprietor, wages,
commissions, income, or net earnings
from self-employment, or similar
compensation.
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g. Is there anything that is expressly
excluded from the definition of payroll
costs?
Yes. The Act expressly excludes the
following:
i. Any compensation of an employee
whose principal place of residence is
outside of the United States;
ii. The compensation of an individual
employee in excess of an annual salary
of $100,000, prorated as necessary;
iii. Federal employment taxes
imposed or withheld between February
15, 2020 and June 30, 2020, including
the employee’s and employer’s share of
FICA (Federal Insurance Contributions
Act) and Railroad Retirement Act taxes,
and income taxes required to be
withheld from employees; and
iv. Qualified sick and family leave
wages for which a credit is allowed
under sections 7001 and 7003 of the
Families First Coronavirus Response
Act (Pub. L. 116–127).
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h. Do independent contractors count as
employees for purposes of PPP loan
calculations?
No, independent contractors have the
ability to apply for a PPP loan on their
own so they do not count for purposes
of a borrower’s PPP loan calculation.
i. What is the interest rate on a PPP
loan?
The interest rate will be 100 basis
points or one percent.
The Administrator, in consultation
with the Secretary, determined that a
one percent interest rate is appropriate.
First, it provides low cost funds to
borrowers to meet eligible payroll costs
and other eligible expenses during this
temporary period of economic
dislocation caused by the coronavirus.
Second, for lenders, the 100 basis points
offers an attractive interest rate relative
to the cost of funding for comparable
maturities. For example, the FDIC’s
weekly national average rate for a 24month CD deposit product for the week
of March 30, 2020 is 42 basis points for
non-jumbo and 44 basis points for
jumbo (https://www.fdic.gov/
regulations/resources/rates/). Third, the
interest rate is higher than the yield on
Treasury securities of comparable
maturity. For example, the yield on the
Treasury two-year note is approximately
23 basis points. This higher yield
combined with the fact that the loans
are 100 percent guaranteed by the SBA
and the fact that lenders will receive a
substantial processing fee from the SBA
provide ample inducement for lenders
to participate in the PPP.
j. What will be the maturity date on a
PPP loan?
The maturity is two years. While the
Act provides that a loan will have a
maximum maturity of up to ten years
from the date the borrower applies for
loan forgiveness (described below), the
Administrator, in consultation with the
Secretary, determined that a two year
loan term is sufficient in light of the
temporary economic dislocations
caused by the coronavirus. Specifically,
the considerable economic disruption
caused by the coronavirus is expected to
abate well before the two year maturity
date such that borrowers will be able to
re-commence business operations and
pay off any outstanding balances on
their PPP loans.
k. Can I apply for more than one PPP
loan?
No. The Administrator, in
consultation with the Secretary,
determined that no eligible borrower
may receive more than one PPP loan.
This means that if you apply for a PPP
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loan you should consider applying for
the maximum amount. While the Act
does not expressly provide that each
eligible borrower may only receive one
PPP loan, the Administrator has
determined, in consultation with the
Secretary, that because all PPP loans
must be made on or before June 30,
2020, a one loan per borrower limitation
is necessary to help ensure that as many
eligible borrowers as possible may
obtain a PPP loan. This limitation will
also help advance Congress’ goal of
keeping workers paid and employed
across the United States.
l. Can I use e-signatures or e-consents if
a borrower has multiple owners?
Yes, e-signature or e-consents can be
used regardless of the number of
owners.
m. Is the PPP ‘‘first-come, first-served?’’
Yes.
n. When will I have to begin paying
principal and interest on my PPP loan?
You will not have to make any
payments for six months following the
date of disbursement of the loan.
However, interest will continue to
accrue on PPP loans during this sixmonth deferment. The Act authorizes
the Administrator to defer loan
payments for up to one year. The
Administrator determined, in
consultation with the Secretary, that a
six-month deferment period is
appropriate in light of the modest
interest rate (one percent) on PPP loans
and the loan forgiveness provisions
contained in the Act.
o. Can my PPP loan be forgiven in
whole or in part?
Yes. The amount of loan forgiveness
can be up to the full principal amount
of the loan and any accrued interest.
That is, the borrower will not be
responsible for any loan payment if the
borrower uses all of the loan proceeds
for forgiveable purposes described
below and employee and compensation
levels are maintained. The actual
amount of loan forgiveness will depend,
in part, on the total amount of payroll
costs, payments of interest on mortgage
obligations incurred before February 15,
2020, rent payments on leases dated
before February 15, 2020, and utility
payments under service agreements
dated before February 15, 2020, over the
eight-week period following the date of
the loan. However, not more than 25
percent of the loan forgiveness amount
may be attributable to non-payroll costs.
While the Act provides that borrowers
are eligible for forgiveness in an amount
equal to the sum of payroll costs and
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any payments of mortgage interest, rent,
and utilities, the Administrator has
determined that the non-payroll portion
of the forgivable loan amount should be
limited to effectuate the core purpose of
the statute and ensure finite program
resources are devoted primarily to
payroll. The Administrator has
determined in consultation with the
Secretary that 75 percent is an
appropriate percentage in light of the
Act’s overarching focus on keeping
workers paid and employed. Further,
the Administrator and the Secretary
believe that applying this threshold to
loan forgiveness is consistent with the
structure of the Act, which provides a
loan amount 75 percent of which is
equivalent to eight weeks of payroll (8
weeks/2.5 months = 56 days/76 days =
74 percent rounded up to 75 percent).
Limiting non-payroll costs to 25 percent
of the forgiveness amount will align
these elements of the program, and will
also help to ensure that the finite
appropriations available for PPP loan
forgiveness are directed toward payroll
protection. SBA will issue additional
guidance on loan forgiveness.
p. Do independent contractors count as
employees for purposes of PPP loan
forgiveness?
No, independent contractors have the
ability to apply for a PPP loan on their
own so they do not count for purposes
of a borrower’s PPP loan forgiveness.
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q. What forms do I need and how do I
submit an application?
The applicant must submit SBA Form
2483 (Paycheck Protection Program
Application Form) and payroll
documentation, as described above. The
lender must submit SBA Form 2484
(Paycheck Protection Program Lender’s
Application for 7(a) Loan Guaranty)
electronically in accordance with
program requirements and maintain the
forms and supporting documentation in
its files.
r. How can PPP loans be used?
The proceeds of a PPP loan are to be
used for:
i. payroll costs (as defined in the Act
and in 2.f.);
ii. costs related to the continuation of
group health care benefits during
periods of paid sick, medical, or family
leave, and insurance premiums;
iii. mortgage interest payments (but
not mortgage prepayments or principal
payments);
iv. rent payments;
v. utility payments;
vi. interest payments on any other
debt obligations that were incurred
before February 15, 2020; and/or
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vii. refinancing an SBA EIDL loan
made between January 31, 2020 and
April 3, 2020. If you received an SBA
EIDL loan from January 31, 2020
through April 3, 2020, you can apply for
a PPP loan. If your EIDL loan was not
used for payroll costs, it does not affect
your eligibility for a PPP loan. If your
EIDL loan was used for payroll costs,
your PPP loan must be used to refinance
your EIDL loan. Proceeds from any
advance up to $10,000 on the EIDL loan
will be deducted from the loan
forgiveness amount on the PPP loan.
However, at least 75 percent of the
PPP loan proceeds shall be used for
payroll costs. For purposes of
determining the percentage of use of
proceeds for payroll costs, the amount
of any EIDL refinanced will be included.
For purposes of loan forgiveness,
however, the borrower will have to
document the proceeds used for payroll
costs in order to determine the amount
of forgiveness. While the Act provides
that PPP loan proceeds may be used for
the purposes listed above and for other
allowable uses described in section 7(a)
of the Small Business Act (15 U.S.C.
636(a)), the Administrator believes that
finite appropriations and the structure
of the Act warrant a requirement that
borrowers use a substantial portion of
the loan proceeds for payroll costs,
consistent with Congress’ overarching
goal of keeping workers paid and
employed. As with the similar
limitation on the forgiveness amount
explained earlier, the Administrator, in
consultation with the Secretary, has
determined that 75 percent is an
appropriate percentage that will align
this element of the program with the
loan amount, 75 percent of which is
equivalent to eight weeks of payroll.
This limitation on use of the loan funds
will help to ensure that the finite
appropriations available for these loans
are directed toward payroll protection,
as each loan that is issued depletes the
appropriation, regardless of whether
portions of the loan are later forgiven.
s. What happens if PPP loan funds are
misused?
If you use PPP funds for unauthorized
purposes, SBA will direct you to repay
those amounts. If you knowingly use the
funds for unauthorized purposes, you
will be subject to additional liability
such as charges for fraud. If one of your
shareholders, members, or partners uses
PPP funds for unauthorized purposes,
SBA will have recourse against the
shareholder, member, or partner for the
unauthorized use.
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t. What certifications need to be made?
On the Paycheck Protection Program
application, an authorized
representative of the applicant must
certify in good faith to all of the below: 1
i. The applicant was in operation on
February 15, 2020 and had employees
for whom it paid salaries and payroll
taxes or paid independent contractors,
as reported on a Form 1099–MISC.
ii. Current economic uncertainty
makes this loan request necessary to
support the ongoing operations of the
applicant.
iii. The funds will be used to retain
workers and maintain payroll or make
mortgage interest payments, lease
payments, and utility payments; I
understand that if the funds are
knowingly used for unauthorized
purposes, the Federal Government may
hold me legally liable such as for
charges of fraud. As explained above,
not more than 25 percent of loan
proceeds may be used for non-payroll
costs.
iv. Documentation verifying the
number of full-time equivalent
employees on payroll as well as the
dollar amounts of payroll costs, covered
mortgage interest payments, covered
rent payments, and covered utilities for
the eight week period following this
loan will be provided to the lender.
v. Loan forgiveness will be provided
for the sum of documented payroll
costs, covered mortgage interest
payments, covered rent payments, and
covered utilities. As explained above,
not more than 25 percent of the forgiven
amount may be for non-payroll costs.
vi. During the period beginning on
February 15, 2020 and ending on
December 31, 2020, the applicant has
not and will not receive another loan
under this program.
vii. I further certify that the
information provided in this application
and the information provided in all
supporting documents and forms is true
and accurate in all material respects. I
understand that knowingly making a
false statement to obtain a guaranteed
loan from SBA is punishable under the
law, including under 18 U.S.C. 1001
and 3571 by imprisonment of not more
than five years and/or a fine of up to
$250,000; under 15 U.S.C. 645 by
imprisonment of not more than two
years and/or a fine of not more than
$5,000; and, if submitted to a federally
insured institution, under 18 U.S.C.
1014 by imprisonment of not more than
thirty years and/or a fine of not more
than $1,000,000.
1 A representative of the applicant can certify for
the business as a whole if the representative is
legally authorized to do so.
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viii. I acknowledge that the lender
will confirm the eligible loan amount
using tax documents I have submitted.
I affirm that these tax documents are
identical to those submitted to the
Internal Revenue Service. I also
understand, acknowledge, and agree
that the Lender can share the tax
information with SBA’s authorized
representatives, including authorized
representatives of the SBA Office of
Inspector General, for the purpose of
compliance with SBA Loan Program
Requirements and all SBA reviews.
3. What do lenders need to know and
do?
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a. Who is eligible to make PPP loans?
i. All SBA 7(a) lenders are
automatically approved to make PPP
loans on a delegated basis.
ii. The Act provides that the authority
to make PPP loans can be extended to
additional lenders determined by the
Administrator and the Secretary to have
the necessary qualifications to process,
close, disburse, and service loans made
with the SBA guarantee. Since SBA is
authorized to make PPP loans up to
$349 billion by June 30, 2020, the
Adminstrator and the Secretary have
jointly determined that authorizing
additional lenders is necessary to
achieve the purpose of allowing as
many eligible borrowers as possible to
receive loans by the June 30, 2020
deadline.
iii. The following types of lenders
have been determined to meet the
criteria and are eligible to make PPP
loans unless they currently are
designated in Troubled Condition by
their primary Federal regulator or are
subject to a formal enforcement action
with their primary Federal regulator that
addresses unsafe or unsound lending
practices:
I. Any federally insured depository
institution or any federally insured
credit union;
II. Any Farm Credit System institution
(other than the Federal Agricultural
Mortgage Corporation) as defined in 12
U.S.C. 2002(a) that applies the
requirements under the Bank Secrecy
Act and its implementing regulations
(collectively, BSA) as a federally
regulated financial institution, or
functionally equivalent requirements
that are not altered by this rule; and
III. Any depository or non-depository
financing provider that originates,
maintains, and services business loans
or other commercial financial
receivables and participation interests;
has a formalized compliance program;
applies the requirements under the BSA
as a federally regulated financial
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institution, or the BSA requirements of
an equivalent federally regulated
financial institution; has been operating
since at least February 15, 2019, and has
originated, maintained, and serviced
more than $50 million in business loans
or other commercial financial
receivables during a consecutive 12
month period in the past 36 months, or
is a service provider to any insured
depository institution that has a contract
to support such institution’s lending
activities in accordance with 12 U.S.C.
1867(c) and is in good standing with the
appropriate Federal banking agency.
iv. Qualified institutions described in
3.a.iii.I. and II. will be automatically
qualified under delegated authority by
the SBA upon transmission of CARES
Act Section 1102 Lender Agreement
(SBA Form 3506) unless they currently
are designated in Troubled Condition by
their primary Federal regulator or are
subject to a formal enforcement action
by their primary Federal regulator that
addresses unsafe or unsound lending
practices.
b. What do lenders have to do in terms
of loan underwriting?
Each lender shall:
i. Confirm receipt of borrower
certifications contained in Paycheck
Protection Program Application form
issued by the Administration;
ii. 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;
iii. 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
iv. Follow applicable BSA
requirements:
I. Federally insured depository
institutions and federally insured credit
unions should continue to follow their
existing BSA protocols when making
PPP loans to either new or existing
customers who are eligible borrowers
under the PPP. PPP loans for existing
customers will not require reverification under applicable BSA
requirements, unless otherwise
indicated by the institution’s risk-based
approach to BSA compliance.
II. Entities that are not presently
subject to the requirements of the BSA,
should, prior to engaging in PPP lending
activities, including making PPP loans
to either new or existing customers who
are eligible borrowers under the PPP,
establish an anti-money laundering
(AML) compliance program equivalent
to that of a comparable federally
regulated institution. Depending upon
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20815
the comparable federally regulated
institution, such a program may include
a customer identification program (CIP),
which includes identifying and
verifying their PPP borrowers’ identities
(including e.g., date of birth, address,
and taxpayer identification number),
and, if that PPP borrower is a company,
following any applicable beneficial
ownership information collection
requirements. Alternatively, if available,
entities may rely on the CIP of a
federally insured depository institution
or federally insured credit union with
an established CIP as part of its AML
program. In either instance, entities
should also understand the nature and
purpose of their PPP customer
relationships to develop customer risk
profiles. Such entities will also
generally have to identify and report
certain suspicious activity to the U.S.
Department of the Treasury’s Financial
Crimes Enforcement Network (FinCEN).
If such entities have questions with
regard to meeting these requirements,
they should contact the FinCEN
Regulatory Support Section at FRC@
fincen.gov. In addition, FinCEN has
created a COVID–19-specific contact
channel, via a specific drop-down
category, for entities to communicate to
FinCEN COVID–19-related concerns
while adhering to their BSA obligations.
Entities that wish to communicate such
COVID–19-related concerns to FinCEN
should go to www.FinCEN.gov, click on
‘‘Need Assistance,’’ and select
‘‘COVID19’’ in the subject drop-down
list.
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.
c. Can lenders rely on borrower
documentation for loan forgiveness?
Yes. 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. The Administrator, in
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consultation with the Secretary, has
determined that lender reliance on a
borrower’s required documents and
attestation is necessary and appropriate
in light of section 1106(h) of the Act,
which prohibits the Administrator from
taking an enforcement action or
imposing penalties if the lender has
received a borrower attestation.
d. What fees will lenders be paid?
SBA will pay lenders fees for
processing PPP loans in the following
amounts:
i. Five (5) percent for loans of not
more than $350,000;
ii. Three (3) percent for loans of more
than $350,000 and less than $2,000,000;
and
iii. One (1) percent for loans of at least
$2,000,000.
e. Do lenders have to apply the ‘‘credit
elsewhere test’’?
No. When evaluating an applicant’s
eligibility lenders will not be required to
apply the ‘‘credit elsewhere test’’ (as set
forth in section 7(a)(1)(A) of the Small
Business Act (15 U.S.C. 636) and SBA
regulations at 13 CFR 120.101)).
4. What do both borrowers and lenders
need to know and do?
jbell on DSKJLSW7X2PROD with RULES
a. What are the loan terms and
conditions?
Loans will be guaranteed under the
PPP under the same terms, conditions
and processes as other 7(a) loans, with
certain changes including but not
limited to:
i. The guarantee percentage is 100
percent.
ii. No collateral will be required.
iii. No personal guarantees will be
required.
iv. The interest rate will be 100 basis
points or one percent.
v. All loans will be processed by all
lenders under delegated authority and
lenders will be permitted to rely on
certifications of the borrower in order to
determine eligibility of the borrower
and the use of loan proceeds.
b. Are there any fee waivers?
i. There will be no up-front guarantee
fee payable to SBA by the Borrower;
ii. There will be no lender’s annual
service fee (‘‘on-going guaranty fee’’)
payable to SBA;
iii. There will be no subsidy
recoupment fee; and
iv. There will be no fee payable to
SBA for any guarantee sold into the
secondary market.
c. Who pays the fee to an agent who
assists a borrower?
Agent fees will be paid by the lender
out of the fees the lender receives from
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16:09 Apr 14, 2020
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SBA. Agents may not collect fees from
the borrower or be paid out of the PPP
loan proceeds. The total amount that an
agent may collect from the lender for
assistance in preparing an application
for a PPP loan (including referral to the
lender) may not exceed:
i. One (1) percent for loans of not
more than $350,000;
ii. 0.50 percent for loans of more than
$350,000 and less than $2 million; and
iii. 0.25 percent for loans of at least $2
million.
The Act authorizes the Administrator
to establish limits on agent fees. The
Administrator, in consultation with the
Secretary, determined that the agent fee
limits set forth above are reasonable
based upon the application req
uirements and the fees that lenders
receive for making PPP loans.
d. Can PPP loans be sold into the
secondary market?
Yes. A PPP loan may be sold on the
secondary market after the loan is fully
disbursed. A PPP loan may be sold on
the secondary market at a premium or
a discount to par value. SBA will issue
guidance regarding any advance
purchase for loans sold in the secondary
market.
e. Can SBA purchase some or all of the
loan in advance?
Yes. A lender may request that the
SBA purchase the expected forgiveness
amount of a PPP loan or pool of PPP
loans at the end of week seven of the
covered period. The expected
forgiveness amount is the amount of
loan principal the lender reasonably
expects the borrower to expend on
payroll costs, covered mortgage interest,
covered rent, and covered utility
payments during the eight week period
after loan disbursement. At least 75
percent of the expected forgiveness
amount shall be for payroll costs, as
provided in 2.o. To submit a PPP loan
or pool of PPP loans for advance
purchase, a lender shall submit a report
requesting advance purchase with the
expected forgiveness amount to the
SBA. The report shall include: the
Paycheck Protection Program
Application Form (SBA Form 2483) and
any supporting documentation
submitted with such application; the
Paycheck Protection Program Lender’s
Application for 7(a) Loan Guaranty
(SBA Form 2484) and any supporting
documentation; a detailed narrative
explaining the assumptions used in
determining the expected forgiveness
amount, the basis for those assumptions,
alternative assumptions considered, and
why alternative assumptions were not
used; any information obtained from the
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Fmt 4700
Sfmt 4700
borrower since the loan was disbursed
that the lender used to determine the
expected forgiveness amount, which
should include the same documentation
required to apply for loan forgiveness
such as payroll tax filings, cancelled
checks, and other payment
documentation; and any additional
information the Administrator may
require to determine whether the
expected forgiveness amount is
reasonable. The Administrator, in
consultation with the Secretary,
determined that seven weeks is the
minimum period of time necessary for
a lender to reasonably determine the
expected forgiveness amount for a PPP
loan or pool of PPP loans, since the PPP
is a new program and the likelihood that
many borrowers will be new clients of
the lender. The expected forgiveness
amount may not exceed the total
amount of principal on the PPP loan or
pool of loans. The Administrator will
purchase the expected forgiveness
amount of the PPP loan(s) within 15
days of the date on which the
Administrator receives a complete
report that demonstrates that the
expected forgiveness amount is indeed
reasonable.
5. Additional Information
All loans guaranteed by the SBA
pursuant to the CARES Act will be
made consistent with constitutional,
statutory, and regulatory protections for
religious liberty, including the First
Amendment to the Constitution, the
Religious Freedom Restoration Act, 42
U.S.C. 2000bb–1 and bb–3, and SBA
regulation at 13 CFR 113.3–1h, which
provides that nothing in SBA
nondiscrimination regulations shall
apply to a religious corporation,
association, educational institution or
society with respect to the membership
or the employment of individuals of a
particular religion to perform work
connected with the carrying on by such
corporation, association, educational
institution or society of its religious
activities. SBA intends to promptly
issue additional guidance with regard to
religious liberty protections under this
program.
SBA may provide further guidance, if
needed, through SBA notices and a
program guide which will be posted on
SBA’s website at www.sba.gov.
Questions on the Paycheck Protection
Program 7(a) Loans may be directed to
the Lender Relations Specialist in the
local SBA Field Office. The local SBA
Field Office may be found at https://
www.sba.gov/tools/local-assistance/
districtoffices.
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations
Compliance With Executive Orders
12866, 12988, 13132, and 13771, the
Paperwork Reduction Act (44 U.S.C.
Ch. 35), and the Regulatory Flexibility
Act (5 U.S.C. 601–612)
E.O. 12866 and E.O. 13563
This interim final rule is
economically significant for the
purposes of Executive Orders 12866 and
13563. SBA, however, is proceeding
under the emergency provision at
Executive Order 12866 Section
6(a)(3)(D) based on the need to move
expeditiously to mitigate the current
economic conditions arising from the
COVID–19 emergency. This rule’s
designation under Executive Order
13771 will be informed by public
comment.
This rule is necessary to implement
Sections 1102 and 1106 of the CARES
Act in order to provide economic relief
to small businesses nationwide
adversely impacted under the COVID–
19 Emergency Declaration. We
anticipate that this rule will result in
substantial benefits to small businesses,
their employees, and the communities
they serve. However, we lack data to
estimate the effects of this rule.
Executive Order 12988
SBA has drafted this rule, to the
extent practicable, in accordance with
the standards set forth in section 3(a)
and 3(b)(2) of Executive Order 12988, to
minimize litigation, eliminate
ambiguity, and reduce burden. The rule
has no preemptive or retroactive effect.
jbell on DSKJLSW7X2PROD with RULES
Executive Order 13132
SBA has determined that this rule
will not have substantial direct effects
on the States, on the relationship
between the National Government and
the States, or on the distribution of
power and responsibilities among the
various layers of government. Therefore,
SBA has determined that this rule has
no federalism implications warranting
preparation of a federalism assessment.
Paperwork Reduction Act, 44 U.S.C.
Chapter 35
SBA has determined that this rule
will impose recordkeeping or reporting
requirements under the Paperwork
Reduction Act (‘‘PRA’’). SBA has
obtained emergency approval under
OMB Control Number 3245–0407 for the
information collection (IC) required to
implement the program described
above. This IC consists of Form 2483
(Paycheck Protection Program
Application Form), SBA Form 2484
(Paycheck Protection Program Lender’s
Application for 7(a) Loan Guaranty),
and SBA Form 3506 (CARES Act
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16:09 Apr 14, 2020
Jkt 250001
Section 1102 Lender Agreement), and
SBA Form 3507 (CARES Act Section
1102 Lender Agreement—Non-Bank and
Non-Insured Depository Institution
Lender). The collection is approved for
use until September 30, 2020.
Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA)
generally requires that when an agency
issues a proposed rule, or a final rule
pursuant to section 553(b) of the APA or
another law, the agency must prepare a
regulatory flexibility analysis that meets
the requirements of the RFA and
publish such analysis in the Federal
Register. 5 U.S.C. 603, 604. Specifically,
the RFA normally requires agencies to
describe the impact of a rulemaking on
small entities by providing a regulatory
impact analysis. Such analysis must
address the consideration of regulatory
options that would lessen the economic
effect of the rule on small entities. The
RFA defines a ‘‘small entity’’ as (1) a
proprietary firm meeting the size
standards of the Small Business
Administration (SBA); (2) a nonprofit
organization that is not dominant in its
field; or (3) a small government
jurisdiction with a population of less
than 50,000. 5 U.S.C. 601(3)–(6). Except
for such small government jurisdictions,
neither State nor local governments are
‘‘small entities.’’ Similarly, for purposes
of the RFA, individual persons are not
small entities.
The requirement to conduct a
regulatory impact analysis does not
apply if the head of the agency ‘‘certifies
that the rule will not, if promulgated,
have a significant economic impact on
a substantial number of small entities.’’
5 U.S.C. 605(b). The agency must,
however, publish the certification in the
Federal Register at the time of
publication of the rule, ‘‘along with a
statement providing the factual basis for
such certification.’’ If the agency head
has not waived the requirements for a
regulatory flexibility analysis in
accordance with the RFA’s waiver
provision, and no other RFA exception
applies, the agency must prepare the
regulatory flexibility analysis and
publish it in the Federal Register at the
time of promulgation or, if the rule is
promulgated in response to an
emergency that makes timely
compliance impracticable, within 180
days of publication of the final rule. 5
U.S.C. 604(a), 608(b).
Rules that are exempt from notice and
comment are also exempt from the RFA
requirements, including conducting a
regulatory flexibility analysis, when
among other things the agency for good
cause finds that notice and public
procedure are impracticable,
PO 00000
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Sfmt 4700
20817
unnecessary, or contrary to the public
interest. Small Business
Administration’s Office of Advocacy
guide: How to Comply with the
Regulatory Flexibility Ac. Ch.1. p.9.
Accordingly, SBA is not required to
conduct a regulatory flexibility analysis.
Authority: 15 U.S.C. 636(a)(36);
Coronavirus Aid, Relief, and Economic
Security Act, Public Law 116–136,
Section 1114.
Jovita Carranza,
Administrator.
[FR Doc. 2020–07672 Filed 4–10–20; 4:15 pm]
BILLING CODE P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
[Docket No. SBA–2020–0019]
RIN 3245–AH35
Business Loan Program Temporary
Changes; Paycheck Protection
Program
U.S. Small Business
Administration.
ACTION: Interim final rule.
AGENCY:
Elsewhere in this issue of the
Federal Register, the U.S. Small
Business Administration (SBA) is
publishing an interim final rule (the
Initial Rule) announcing the
implementation of sections 1102 and
1106 of the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act or
the Act). Section 1102 of the Act
temporarily adds a new program, titled
the ‘‘Paycheck Protection Program,’’ to
the SBA’s 7(a) Loan Program. Section
1106 of the Act provides for forgiveness
of up to the full principal amount of
qualifying loans guaranteed under the
Paycheck Protection Program. The
Paycheck Protection Program and loan
forgiveness are intended to provide
economic relief to small businesses
nationwide adversely impacted by the
Coronavirus Disease 2019 (COVID–19).
This interim final rule supplements the
Initial Rule with additional guidance
regarding the application of certain
affiliate rules applicable to SBA’s
implementation of sections 1102 and
1106 of the Act and requests public
comment.
DATES:
Effective date: This interim final rule
is effective April 15, 2020.
Applicability date: This interim final
rule applies to applications submitted
under the Paycheck Protection Program
through June 30, 2020, or until funds
made available for this purpose are
exhausted.
SUMMARY:
E:\FR\FM\15APR1.SGM
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Agencies
[Federal Register Volume 85, Number 73 (Wednesday, April 15, 2020)]
[Rules and Regulations]
[Pages 20811-20817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07672]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 /
Rules and Regulations
[[Page 20811]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket No. SBA-2020-0015]
RIN 3245-AH34
Business Loan Program Temporary Changes; Paycheck Protection
Program
AGENCY: U.S. Small Business Administration.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: This interim final rule announces the implementation of
sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act or the Act). Section 1102 of the Act
temporarily adds a new product, titled the ``Paycheck Protection
Program,'' to the U.S. Small Business Administration's (SBA's) 7(a)
Loan Program. Section 1106 of the Act provides for forgiveness of up to
the full principal amount of qualifying loans guaranteed under the
Paycheck Protection Program. The Paycheck Protection Program and loan
forgiveness are intended to provide economic relief to small businesses
nationwide adversely impacted under the Coronavirus Disease 2019
(COVID-19) Emergency Declaration (COVID-19 Emergency Declaration)
issued by President Trump on March 13, 2020. This interim final rule
outlines the key provisions of SBA's implementation of sections 1102
and 1106 of the Act in formal guidance and requests public comment.
DATES:
Effective date: This interim final rule is effective April 15,
2020.
Applicability date: This interim final rule applies to applications
submitted under the Paycheck Protection Program through June 30, 2020,
or until funds made available for this purpose are exhausted.
Comment Date: Comments must be received on or before May 15, 2020.
ADDRESSES: You may submit comments, identified by number SBA-2020-0015
through the Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
SBA will post all comments on www.regulations.gov. If you wish to
submit confidential business information (CBI) as defined in the User
Notice at www.regulations.gov, please send an email to [email protected].
Highlight the information that you consider to be CBI and explain why
you believe SBA should hold this information as confidential. SBA will
review the information and make the final determination whether it will
publish the information.
FOR FURTHER INFORMATION CONTACT: Call Center Representative at 833-572-
0502, or the local SBA Field Office; the list of offices can be found
at https://www.sba.gov/tools/local-assistance/districtoffices.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 13, 2020, President Trump declared the ongoing Coronavirus
Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude
to warrant an emergency declaration for all states, territories, and
the District of Columbia. With the COVID-19 emergency, many small
businesses nationwide are experiencing economic hardship as a direct
result of the Federal, State, and local public health measures that are
being taken to minimize the public's exposure to the virus. These
measures, some of which are government-mandated, are being implemented
nationwide and include the closures of restaurants, bars, and gyms. In
addition, based on the advice of public health officials, other
measures, such as keeping a safe distance from others or even stay-at-
home orders, are being implemented, resulting in a dramatic decrease in
economic activity as the public avoids malls, retail stores, and other
businesses.
On March 27, 2020, the President signed the Coronavirus Aid,
Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L.
116-136) to provide emergency assistance and health care response for
individuals, families, and businesses affected by the coronavirus
pandemic. The Small Business Administration (SBA) received funding and
authority through the Act to modify existing loan programs and
establish a new loan program to assist small businesses nationwide
adversely impacted by the COVID-19 emergency.
Section 1102 of the Act temporarily permits SBA to guarantee 100
percent of 7(a) loans under a new program titled the ``Paycheck
Protection Program.'' Section 1106 of the Act provides for forgiveness
of up to the full principal amount of qualifying loans guaranteed under
the Paycheck Protection Program. A more detailed discussion of sections
1102 and 1106 of the Act is found in section III below.
II. Comments and Immediate Effective Date
The intent of the Act is that SBA provide relief to America's small
businesses expeditiously. This intent, along with the dramatic decrease
in economic activity nationwide, provides good cause for SBA to
dispense with the 30-day delayed effective date provided in the
Administrative Procedure Act. Specifically, small businesses need to be
informed on how to apply for a loan and the terms of the loan under
section 1102 of the Act as soon as possible because the last day to
apply for and receive a loan is June 30, 2020. The immediate effective
date of this interim final rule will benefit small businesses so that
they can immediately apply for the loan with a full understanding of
loan terms and conditions. This interim final rule is effective without
advance notice and public comment because section 1114 of the Act
authorizes SBA to issue regulations to implement Title 1 of the Act
without regard to notice requirements. This rule is being issued to
allow for immediate implementation of this program. Although this
interim final rule is effective immediately, comments are solicited
from interested members of the public on all aspects of the interim
final rule, including section III below. These comments must be
submitted on or before May 15, 2020. The SBA will consider these
comments and the need for making any revisions as a result of these
comments.
III. Temporary New Business Loan Program: Paycheck Protection Program
Overview
The CARES Act was enacted to provide immediate assistance to
individuals, families, and businesses
[[Page 20812]]
affected by the COVID-19 emergency. Among the provisions contained in
the CARES Act are provisions authorizing SBA to temporarily guarantee
loans under a new 7(a) loan program titled the ``Paycheck Protection
Program.'' Loans guaranteed under the Paycheck Protection Program (PPP)
will be 100 percent guaranteed by SBA, and the full principal amount of
the loans may qualify for loan forgiveness. The following outlines the
key provisions of the PPP.
1. General
SBA is authorized to guarantee loans under the PPP through June 30,
2020. Congress authorized a program level of $349,000,000,000 to
provide guaranteed loans under this new 7(a) program. The intent of the
Act is that SBA provide relief to America's small businesses
expeditiously, which is expressed in the Act by giving all lenders
delegated authority and streamlining the requirements of the regular
7(a) loan program. For example, for loans made under the PPP, SBA will
not require the lenders to comply with section 120.150 ``What are SBA's
lending criteria?.'' SBA will allow lenders to 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. Lenders must comply with the applicable lender obligations
set forth in this interim final rule, but will be held harmless for
borrowers' failure to comply with program criteria; remedies for
borrower violations or fraud are separately addressed in this interim
final rule. The program requirements of the PPP identified in this rule
temporarily supersede any conflicting Loan Program Requirement (as
defined in 13 CFR 120.10).
2. What do borrowers need to know and do?
a. Am I eligible?
You are eligible for a PPP loan if you have 500 or fewer employees
whose principal place of residence is in the United States, or are a
business that operates in a certain industry and meet the applicable
SBA employee-based size standards for that industry, and:
i. You are:
A. A small business concern as defined in section 3 of the Small
Business Act (15 U.S.C. 632), and subject to SBA's affiliation rules
under 13 CFR 121.301(f) unless specifically waived in the Act; or
B. A tax-exempt nonprofit organization described in section
501(c)(3) of the Internal Revenue Code (IRC), a tax-exempt veterans
organization described in section 501(c)(19) of the IRC, Tribal
business concern described in section 31(b)(2)(C) of the Small Business
Act, or any other business; and
ii. You were in operation on February 15, 2020 and either had
employees for whom you paid salaries and payroll taxes or paid
independent contractors, as reported on a Form 1099-MISC.
You are also eligible for a PPP loan if you are an individual who
operates under a sole proprietorship or as an independent contractor or
eligible self-employed individual, and you were in operation on
February 15, 2020.
You must also 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.
SBA intends to promptly issue additional guidance with regard to
the applicability of affiliation rules at 13 CFR 121.103 and 121.301 to
PPP loans.
b. Could I be ineligible even if I meet the eligibility requirements in
(a) above?
You are ineligible for a PPP loan if, for example:
i. You are engaged in any activity that is illegal under Federal,
state, or local law;
ii. You are a household employer (individuals who employ household
employees such as nannies or housekeepers);
iii. An owner of 20 percent or more of the equity of the applicant
is incarcerated, on probation, on parole; presently subject to an
indictment, criminal information, arraignment, or other means by which
formal criminal charges are brought in any jurisdiction; or has been
convicted of a felony within the last five years; or
iv. You, or any business owned or controlled by you or any of your
owners, has ever obtained a direct or guaranteed loan from SBA or any
other Federal agency that is currently delinquent or has defaulted
within the last seven years and caused a loss to the government.
The Administrator, in consultation with the Secretary of the
Treasury (the Secretary), determined that household employers are
ineligible because they are not businesses. 13 CFR 120.100.
c. How do I determine if I am ineligible?
Businesses that are not eligible for PPP loans are identified in 13
CFR 120.110 and described further in SBA's Standard Operating Procedure
(SOP) 50 10, Subpart B, Chapter 2, except that nonprofit organizations
authorized under the Act are eligible. (SOP 50 10 can be found at
https://www.sba.gov/document/sop-50-10-5-lender-development-company-loan-programs.)
d. I have determined that I am eligible. How much can I borrow?
Under the PPP, the maximum loan amount is the lesser of $10 million
or an amount that you will calculate using a payroll-based formula
specified in the Act, as explained below.
e. How do I calculate the maximum amount I can borrow?
The following methodology, which is one of the methodologies
contained in the Act, will be most useful for many applicants.
i. Step 1: Aggregate payroll costs (defined in detail below in f.)
from the last twelve months for employees whose principal place of
residence is the United States.
ii. Step 2: Subtract any compensation paid to an employee in excess
of an annual salary of $100,000 and/or any amounts paid to an
independent contractor or sole proprietor in excess of $100,000 per
year.
iii. Step 3: Calculate average monthly payroll costs (divide the
amount from Step 2 by 12).
iv. Step 4: Multiply the average monthly payroll costs from Step 3
by 2.5.
v. Step 5: Add the outstanding amount of an Economic Injury
Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020,
less the amount of any ``advance'' under an EIDL COVID-19 loan (because
it does not have to be repaid).
The examples below illustrate this methodology.
i. Example 1--No employees make more than $100,000
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Maximum loan amount is $25,000
ii. Example 2--Some employees make more than $100,000
Annual payroll: $1,500,000
Subtract compensation amounts in excess of an annual salary of
$100,000: $1,200,000
Average monthly qualifying payroll: $100,000
Multiply by 2.5 = $250,000
Maximim loan amount is $250,000
[[Page 20813]]
iii. Example 3--No employees make more than $100,000, outstanding EIDL
loan of $10,000.
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Add EIDL loan of $10,000 = $35,000
Maximum loan amount is $35,000
iv. Example 4--Some employees make more than $100,000, outstanding EIDL
loan of $10,000
Annual payroll: $1,500,000
Subtract compensation amounts in excess of an annual salary of
$100,000: $1,200,000
Average monthly qualifying payroll: $100,000
Multiply by 2.5 = $250,000
Add EIDL loan of $10,000 = $260,000
Maximum loan amount is $260,000
f. What qualifies as ``payroll costs?''
Payroll costs consist of compensation to employees (whose principal
place of residence is the United States) in the form of salary, wages,
commissions, or similar compensation; cash tips or the equivalent
(based on employer records of past tips or, in the absence of such
records, a reasonable, good-faith employer estimate of such tips);
payment for vacation, parental, family, medical, or sick leave;
allowance for separation or dismissal; payment for the provision of
employee benefits consisting of group health care coverage, including
insurance premiums, and retirement; payment of state and local taxes
assessed on compensation of employees; and for an independent
contractor or sole proprietor, wages, commissions, income, or net
earnings from self-employment, or similar compensation.
g. Is there anything that is expressly excluded from the definition of
payroll costs?
Yes. The Act expressly excludes the following:
i. Any compensation of an employee whose principal place of
residence is outside of the United States;
ii. The compensation of an individual employee in excess of an
annual salary of $100,000, prorated as necessary;
iii. Federal employment taxes imposed or withheld between February
15, 2020 and June 30, 2020, including the employee's and employer's
share of FICA (Federal Insurance Contributions Act) and Railroad
Retirement Act taxes, and income taxes required to be withheld from
employees; and
iv. Qualified sick and family leave wages for which a credit is
allowed under sections 7001 and 7003 of the Families First Coronavirus
Response Act (Pub. L. 116-127).
h. Do independent contractors count as employees for purposes of PPP
loan calculations?
No, independent contractors have the ability to apply for a PPP
loan on their own so they do not count for purposes of a borrower's PPP
loan calculation.
i. What is the interest rate on a PPP loan?
The interest rate will be 100 basis points or one percent.
The Administrator, in consultation with the Secretary, determined
that a one percent interest rate is appropriate. First, it provides low
cost funds to borrowers to meet eligible payroll costs and other
eligible expenses during this temporary period of economic dislocation
caused by the coronavirus. Second, for lenders, the 100 basis points
offers an attractive interest rate relative to the cost of funding for
comparable maturities. For example, the FDIC's weekly national average
rate for a 24-month CD deposit product for the week of March 30, 2020
is 42 basis points for non-jumbo and 44 basis points for jumbo (https://www.fdic.gov/regulations/resources/rates/). Third, the interest rate
is higher than the yield on Treasury securities of comparable maturity.
For example, the yield on the Treasury two-year note is approximately
23 basis points. This higher yield combined with the fact that the
loans are 100 percent guaranteed by the SBA and the fact that lenders
will receive a substantial processing fee from the SBA provide ample
inducement for lenders to participate in the PPP.
j. What will be the maturity date on a PPP loan?
The maturity is two years. While the Act provides that a loan will
have a maximum maturity of up to ten years from the date the borrower
applies for loan forgiveness (described below), the Administrator, in
consultation with the Secretary, determined that a two year loan term
is sufficient in light of the temporary economic dislocations caused by
the coronavirus. Specifically, the considerable economic disruption
caused by the coronavirus is expected to abate well before the two year
maturity date such that borrowers will be able to re-commence business
operations and pay off any outstanding balances on their PPP loans.
k. Can I apply for more than one PPP loan?
No. The Administrator, in consultation with the Secretary,
determined that no eligible borrower may receive more than one PPP
loan. This means that if you apply for a PPP loan you should consider
applying for the maximum amount. While the Act does not expressly
provide that each eligible borrower may only receive one PPP loan, the
Administrator has determined, in consultation with the Secretary, that
because all PPP loans must be made on or before June 30, 2020, a one
loan per borrower limitation is necessary to help ensure that as many
eligible borrowers as possible may obtain a PPP loan. This limitation
will also help advance Congress' goal of keeping workers paid and
employed across the United States.
l. Can I use e-signatures or e-consents if a borrower has multiple
owners?
Yes, e-signature or e-consents can be used regardless of the number
of owners.
m. Is the PPP ``first-come, first-served?''
Yes.
n. When will I have to begin paying principal and interest on my PPP
loan?
You will not have to make any payments for six months following the
date of disbursement of the loan. However, interest will continue to
accrue on PPP loans during this six-month deferment. The Act authorizes
the Administrator to defer loan payments for up to one year. The
Administrator determined, in consultation with the Secretary, that a
six-month deferment period is appropriate in light of the modest
interest rate (one percent) on PPP loans and the loan forgiveness
provisions contained in the Act.
o. Can my PPP loan be forgiven in whole or in part?
Yes. The amount of loan forgiveness can be up to the full principal
amount of the loan and any accrued interest. That is, the borrower will
not be responsible for any loan payment if the borrower uses all of the
loan proceeds for forgiveable purposes described below and employee and
compensation levels are maintained. The actual amount of loan
forgiveness will depend, in part, on the total amount of payroll costs,
payments of interest on mortgage obligations incurred before February
15, 2020, rent payments on leases dated before February 15, 2020, and
utility payments under service agreements dated before February 15,
2020, over the eight-week period following the date of the loan.
However, not more than 25 percent of the loan forgiveness amount may be
attributable to non-payroll costs. While the Act provides that
borrowers are eligible for forgiveness in an amount equal to the sum of
payroll costs and
[[Page 20814]]
any payments of mortgage interest, rent, and utilities, the
Administrator has determined that the non-payroll portion of the
forgivable loan amount should be limited to effectuate the core purpose
of the statute and ensure finite program resources are devoted
primarily to payroll. The Administrator has determined in consultation
with the Secretary that 75 percent is an appropriate percentage in
light of the Act's overarching focus on keeping workers paid and
employed. Further, the Administrator and the Secretary believe that
applying this threshold to loan forgiveness is consistent with the
structure of the Act, which provides a loan amount 75 percent of which
is equivalent to eight weeks of payroll (8 weeks/2.5 months = 56 days/
76 days = 74 percent rounded up to 75 percent). Limiting non-payroll
costs to 25 percent of the forgiveness amount will align these elements
of the program, and will also help to ensure that the finite
appropriations available for PPP loan forgiveness are directed toward
payroll protection. SBA will issue additional guidance on loan
forgiveness.
p. Do independent contractors count as employees for purposes of PPP
loan forgiveness?
No, independent contractors have the ability to apply for a PPP
loan on their own so they do not count for purposes of a borrower's PPP
loan forgiveness.
q. What forms do I need and how do I submit an application?
The applicant must submit SBA Form 2483 (Paycheck Protection
Program Application Form) and payroll documentation, as described
above. The lender must submit SBA Form 2484 (Paycheck Protection
Program Lender's Application for 7(a) Loan Guaranty) electronically in
accordance with program requirements and maintain the forms and
supporting documentation in its files.
r. How can PPP loans be used?
The proceeds of a PPP loan are to be used for:
i. payroll costs (as defined in the Act and in 2.f.);
ii. costs related to the continuation of group health care benefits
during periods of paid sick, medical, or family leave, and insurance
premiums;
iii. mortgage interest payments (but not mortgage prepayments or
principal payments);
iv. rent payments;
v. utility payments;
vi. interest payments on any other debt obligations that were
incurred before February 15, 2020; and/or
vii. refinancing an SBA EIDL loan made between January 31, 2020 and
April 3, 2020. If you received an SBA EIDL loan from January 31, 2020
through April 3, 2020, you can apply for a PPP loan. If your EIDL loan
was not used for payroll costs, it does not affect your eligibility for
a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan
must be used to refinance your EIDL loan. Proceeds from any advance up
to $10,000 on the EIDL loan will be deducted from the loan forgiveness
amount on the PPP loan.
However, at least 75 percent of the PPP loan proceeds shall be used
for payroll costs. For purposes of determining the percentage of use of
proceeds for payroll costs, the amount of any EIDL refinanced will be
included. For purposes of loan forgiveness, however, the borrower will
have to document the proceeds used for payroll costs in order to
determine the amount of forgiveness. While the Act provides that PPP
loan proceeds may be used for the purposes listed above and for other
allowable uses described in section 7(a) of the Small Business Act (15
U.S.C. 636(a)), the Administrator believes that finite appropriations
and the structure of the Act warrant a requirement that borrowers use a
substantial portion of the loan proceeds for payroll costs, consistent
with Congress' overarching goal of keeping workers paid and employed.
As with the similar limitation on the forgiveness amount explained
earlier, the Administrator, in consultation with the Secretary, has
determined that 75 percent is an appropriate percentage that will align
this element of the program with the loan amount, 75 percent of which
is equivalent to eight weeks of payroll. This limitation on use of the
loan funds will help to ensure that the finite appropriations available
for these loans are directed toward payroll protection, as each loan
that is issued depletes the appropriation, regardless of whether
portions of the loan are later forgiven.
s. What happens if PPP loan funds are misused?
If you use PPP funds for unauthorized purposes, SBA will direct you
to repay those amounts. If you knowingly use the funds for unauthorized
purposes, you will be subject to additional liability such as charges
for fraud. If one of your shareholders, members, or partners uses PPP
funds for unauthorized purposes, SBA will have recourse against the
shareholder, member, or partner for the unauthorized use.
t. What certifications need to be made?
On the Paycheck Protection Program application, an authorized
representative of the applicant must certify in good faith to all of
the below: \1\
---------------------------------------------------------------------------
\1\ A representative of the applicant can certify for the
business as a whole if the representative is legally authorized to
do so.
---------------------------------------------------------------------------
i. The applicant was in operation on February 15, 2020 and had
employees for whom it paid salaries and payroll taxes or paid
independent contractors, as reported on a Form 1099-MISC.
ii. Current economic uncertainty makes this loan request necessary
to support the ongoing operations of the applicant.
iii. The funds will be used to retain workers and maintain payroll
or make mortgage interest payments, lease payments, and utility
payments; I understand that if the funds are knowingly used for
unauthorized purposes, the Federal Government may hold me legally
liable such as for charges of fraud. As explained above, not more than
25 percent of loan proceeds may be used for non-payroll costs.
iv. Documentation verifying the number of full-time equivalent
employees on payroll as well as the dollar amounts of payroll costs,
covered mortgage interest payments, covered rent payments, and covered
utilities for the eight week period following this loan will be
provided to the lender.
v. Loan forgiveness will be provided for the sum of documented
payroll costs, covered mortgage interest payments, covered rent
payments, and covered utilities. As explained above, not more than 25
percent of the forgiven amount may be for non-payroll costs.
vi. During the period beginning on February 15, 2020 and ending on
December 31, 2020, the applicant has not and will not receive another
loan under this program.
vii. I further certify that the information provided in this
application and the information provided in all supporting documents
and forms is true and accurate in all material respects. I understand
that knowingly making a false statement to obtain a guaranteed loan
from SBA is punishable under the law, including under 18 U.S.C. 1001
and 3571 by imprisonment of not more than five years and/or a fine of
up to $250,000; under 15 U.S.C. 645 by imprisonment of not more than
two years and/or a fine of not more than $5,000; and, if submitted to a
federally insured institution, under 18 U.S.C. 1014 by imprisonment of
not more than thirty years and/or a fine of not more than $1,000,000.
[[Page 20815]]
viii. I acknowledge that the lender will confirm the eligible loan
amount using tax documents I have submitted. I affirm that these tax
documents are identical to those submitted to the Internal Revenue
Service. I also understand, acknowledge, and agree that the Lender can
share the tax information with SBA's authorized representatives,
including authorized representatives of the SBA Office of Inspector
General, for the purpose of compliance with SBA Loan Program
Requirements and all SBA reviews.
3. What do lenders need to know and do?
a. Who is eligible to make PPP loans?
i. All SBA 7(a) lenders are automatically approved to make PPP
loans on a delegated basis.
ii. The Act provides that the authority to make PPP loans can be
extended to additional lenders determined by the Administrator and the
Secretary to have the necessary qualifications to process, close,
disburse, and service loans made with the SBA guarantee. Since SBA is
authorized to make PPP loans up to $349 billion by June 30, 2020, the
Adminstrator and the Secretary have jointly determined that authorizing
additional lenders is necessary to achieve the purpose of allowing as
many eligible borrowers as possible to receive loans by the June 30,
2020 deadline.
iii. The following types of lenders have been determined to meet
the criteria and are eligible to make PPP loans unless they currently
are designated in Troubled Condition by their primary Federal regulator
or are subject to a formal enforcement action with their primary
Federal regulator that addresses unsafe or unsound lending practices:
I. Any federally insured depository institution or any federally
insured credit union;
II. Any Farm Credit System institution (other than the Federal
Agricultural Mortgage Corporation) as defined in 12 U.S.C. 2002(a) that
applies the requirements under the Bank Secrecy Act and its
implementing regulations (collectively, BSA) as a federally regulated
financial institution, or functionally equivalent requirements that are
not altered by this rule; and
III. Any depository or non-depository financing provider that
originates, maintains, and services business loans or other commercial
financial receivables and participation interests; has a formalized
compliance program; applies the requirements under the BSA as a
federally regulated financial institution, or the BSA requirements of
an equivalent federally regulated financial institution; has been
operating since at least February 15, 2019, and has originated,
maintained, and serviced more than $50 million in business loans or
other commercial financial receivables during a consecutive 12 month
period in the past 36 months, or is a service provider to any insured
depository institution that has a contract to support such
institution's lending activities in accordance with 12 U.S.C. 1867(c)
and is in good standing with the appropriate Federal banking agency.
iv. Qualified institutions described in 3.a.iii.I. and II. will be
automatically qualified under delegated authority by the SBA upon
transmission of CARES Act Section 1102 Lender Agreement (SBA Form 3506)
unless they currently are designated in Troubled Condition by their
primary Federal regulator or are subject to a formal enforcement action
by their primary Federal regulator that addresses unsafe or unsound
lending practices.
b. What do lenders have to do in terms of loan underwriting?
Each lender shall:
i. Confirm receipt of borrower certifications contained in Paycheck
Protection Program Application form issued by the Administration;
ii. 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;
iii. 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
iv. Follow applicable BSA requirements:
I. Federally insured depository institutions and federally insured
credit unions should continue to follow their existing BSA protocols
when making PPP loans to either new or existing customers who are
eligible borrowers under the PPP. PPP loans for existing customers will
not require re-verification under applicable BSA requirements, unless
otherwise indicated by the institution's risk-based approach to BSA
compliance.
II. Entities that are not presently subject to the requirements of
the BSA, should, prior to engaging in PPP lending activities, including
making PPP loans to either new or existing customers who are eligible
borrowers under the PPP, establish an anti-money laundering (AML)
compliance program equivalent to that of a comparable federally
regulated institution. Depending upon the comparable federally
regulated institution, such a program may include a customer
identification program (CIP), which includes identifying and verifying
their PPP borrowers' identities (including e.g., date of birth,
address, and taxpayer identification number), and, if that PPP borrower
is a company, following any applicable beneficial ownership information
collection requirements. Alternatively, if available, entities may rely
on the CIP of a federally insured depository institution or federally
insured credit union with an established CIP as part of its AML
program. In either instance, entities should also understand the nature
and purpose of their PPP customer relationships to develop customer
risk profiles. Such entities will also generally have to identify and
report certain suspicious activity to the U.S. Department of the
Treasury's Financial Crimes Enforcement Network (FinCEN). If such
entities have questions with regard to meeting these requirements, they
should contact the FinCEN Regulatory Support Section at [email protected].
In addition, FinCEN has created a COVID-19-specific contact channel,
via a specific drop-down category, for entities to communicate to
FinCEN COVID-19-related concerns while adhering to their BSA
obligations. Entities that wish to communicate such COVID-19-related
concerns to FinCEN should go to www.FinCEN.gov, click on ``Need
Assistance,'' and select ``COVID19'' in the subject drop-down list.
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.
c. Can lenders rely on borrower documentation for loan forgiveness?
Yes. 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.
The Administrator, in
[[Page 20816]]
consultation with the Secretary, has determined that lender reliance on
a borrower's required documents and attestation is necessary and
appropriate in light of section 1106(h) of the Act, which prohibits the
Administrator from taking an enforcement action or imposing penalties
if the lender has received a borrower attestation.
d. What fees will lenders be paid?
SBA will pay lenders fees for processing PPP loans in the following
amounts:
i. Five (5) percent for loans of not more than $350,000;
ii. Three (3) percent for loans of more than $350,000 and less than
$2,000,000; and
iii. One (1) percent for loans of at least $2,000,000.
e. Do lenders have to apply the ``credit elsewhere test''?
No. When evaluating an applicant's eligibility lenders will not be
required to apply the ``credit elsewhere test'' (as set forth in
section 7(a)(1)(A) of the Small Business Act (15 U.S.C. 636) and SBA
regulations at 13 CFR 120.101)).
4. What do both borrowers and lenders need to know and do?
a. What are the loan terms and conditions?
Loans will be guaranteed under the PPP under the same terms,
conditions and processes as other 7(a) loans, with certain changes
including but not limited to:
i. The guarantee percentage is 100 percent.
ii. No collateral will be required.
iii. No personal guarantees will be required.
iv. The interest rate will be 100 basis points or one percent.
v. All loans will be processed by all lenders under delegated
authority and lenders will be permitted to rely on certifications of
the borrower in order to determine eligibility of the borrower and the
use of loan proceeds.
b. Are there any fee waivers?
i. There will be no up-front guarantee fee payable to SBA by the
Borrower;
ii. There will be no lender's annual service fee (``on-going
guaranty fee'') payable to SBA;
iii. There will be no subsidy recoupment fee; and
iv. There will be no fee payable to SBA for any guarantee sold into
the secondary market.
c. Who pays the fee to an agent who assists a borrower?
Agent fees will be paid by the lender out of the fees the lender
receives from SBA. Agents may not collect fees from the borrower or be
paid out of the PPP loan proceeds. The total amount that an agent may
collect from the lender for assistance in preparing an application for
a PPP loan (including referral to the lender) may not exceed:
i. One (1) percent for loans of not more than $350,000;
ii. 0.50 percent for loans of more than $350,000 and less than $2
million; and
iii. 0.25 percent for loans of at least $2 million.
The Act authorizes the Administrator to establish limits on agent
fees. The Administrator, in consultation with the Secretary, determined
that the agent fee limits set forth above are reasonable based upon the
application req uirements and the fees that lenders receive for making
PPP loans.
d. Can PPP loans be sold into the secondary market?
Yes. A PPP loan may be sold on the secondary market after the loan
is fully disbursed. A PPP loan may be sold on the secondary market at a
premium or a discount to par value. SBA will issue guidance regarding
any advance purchase for loans sold in the secondary market.
e. Can SBA purchase some or all of the loan in advance?
Yes. A lender may request that the SBA purchase the expected
forgiveness amount of a PPP loan or pool of PPP loans at the end of
week seven of the covered period. The expected forgiveness amount is
the amount of loan principal the lender reasonably expects the borrower
to expend on payroll costs, covered mortgage interest, covered rent,
and covered utility payments during the eight week period after loan
disbursement. At least 75 percent of the expected forgiveness amount
shall be for payroll costs, as provided in 2.o. To submit a PPP loan or
pool of PPP loans for advance purchase, a lender shall submit a report
requesting advance purchase with the expected forgiveness amount to the
SBA. The report shall include: the Paycheck Protection Program
Application Form (SBA Form 2483) and any supporting documentation
submitted with such application; the Paycheck Protection Program
Lender's Application for 7(a) Loan Guaranty (SBA Form 2484) and any
supporting documentation; a detailed narrative explaining the
assumptions used in determining the expected forgiveness amount, the
basis for those assumptions, alternative assumptions considered, and
why alternative assumptions were not used; any information obtained
from the borrower since the loan was disbursed that the lender used to
determine the expected forgiveness amount, which should include the
same documentation required to apply for loan forgiveness such as
payroll tax filings, cancelled checks, and other payment documentation;
and any additional information the Administrator may require to
determine whether the expected forgiveness amount is reasonable. The
Administrator, in consultation with the Secretary, determined that
seven weeks is the minimum period of time necessary for a lender to
reasonably determine the expected forgiveness amount for a PPP loan or
pool of PPP loans, since the PPP is a new program and the likelihood
that many borrowers will be new clients of the lender. The expected
forgiveness amount may not exceed the total amount of principal on the
PPP loan or pool of loans. The Administrator will purchase the expected
forgiveness amount of the PPP loan(s) within 15 days of the date on
which the Administrator receives a complete report that demonstrates
that the expected forgiveness amount is indeed reasonable.
5. Additional Information
All loans guaranteed by the SBA pursuant to the CARES Act will be
made consistent with constitutional, statutory, and regulatory
protections for religious liberty, including the First Amendment to the
Constitution, the Religious Freedom Restoration Act, 42 U.S.C. 2000bb-1
and bb-3, and SBA regulation at 13 CFR 113.3-1h, which provides that
nothing in SBA nondiscrimination regulations shall apply to a religious
corporation, association, educational institution or society with
respect to the membership or the employment of individuals of a
particular religion to perform work connected with the carrying on by
such corporation, association, educational institution or society of
its religious activities. SBA intends to promptly issue additional
guidance with regard to religious liberty protections under this
program.
SBA may provide further guidance, if needed, through SBA notices
and a program guide which will be posted on SBA's website at
www.sba.gov.
Questions on the Paycheck Protection Program 7(a) Loans may be
directed to the Lender Relations Specialist in the local SBA Field
Office. The local SBA Field Office may be found at https://www.sba.gov/tools/local-assistance/districtoffices.
[[Page 20817]]
Compliance With Executive Orders 12866, 12988, 13132, and 13771, the
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
E.O. 12866 and E.O. 13563
This interim final rule is economically significant for the
purposes of Executive Orders 12866 and 13563. SBA, however, is
proceeding under the emergency provision at Executive Order 12866
Section 6(a)(3)(D) based on the need to move expeditiously to mitigate
the current economic conditions arising from the COVID-19 emergency.
This rule's designation under Executive Order 13771 will be informed by
public comment.
This rule is necessary to implement Sections 1102 and 1106 of the
CARES Act in order to provide economic relief to small businesses
nationwide adversely impacted under the COVID-19 Emergency Declaration.
We anticipate that this rule will result in substantial benefits to
small businesses, their employees, and the communities they serve.
However, we lack data to estimate the effects of this rule.
Executive Order 12988
SBA has drafted this rule, to the extent practicable, in accordance
with the standards set forth in section 3(a) and 3(b)(2) of Executive
Order 12988, to minimize litigation, eliminate ambiguity, and reduce
burden. The rule has no preemptive or retroactive effect.
Executive Order 13132
SBA has determined that this rule will not have substantial direct
effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various layers of government. Therefore, SBA
has determined that this rule has no federalism implications warranting
preparation of a federalism assessment.
Paperwork Reduction Act, 44 U.S.C. Chapter 35
SBA has determined that this rule will impose recordkeeping or
reporting requirements under the Paperwork Reduction Act (``PRA''). SBA
has obtained emergency approval under OMB Control Number 3245-0407 for
the information collection (IC) required to implement the program
described above. This IC consists of Form 2483 (Paycheck Protection
Program Application Form), SBA Form 2484 (Paycheck Protection Program
Lender's Application for 7(a) Loan Guaranty), and SBA Form 3506 (CARES
Act Section 1102 Lender Agreement), and SBA Form 3507 (CARES Act
Section 1102 Lender Agreement--Non-Bank and Non-Insured Depository
Institution Lender). The collection is approved for use until September
30, 2020.
Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA) generally requires that when
an agency issues a proposed rule, or a final rule pursuant to section
553(b) of the APA or another law, the agency must prepare a regulatory
flexibility analysis that meets the requirements of the RFA and publish
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically,
the RFA normally requires agencies to describe the impact of a
rulemaking on small entities by providing a regulatory impact analysis.
Such analysis must address the consideration of regulatory options that
would lessen the economic effect of the rule on small entities. The RFA
defines a ``small entity'' as (1) a proprietary firm meeting the size
standards of the Small Business Administration (SBA); (2) a nonprofit
organization that is not dominant in its field; or (3) a small
government jurisdiction with a population of less than 50,000. 5 U.S.C.
601(3)-(6). Except for such small government jurisdictions, neither
State nor local governments are ``small entities.'' Similarly, for
purposes of the RFA, individual persons are not small entities.
The requirement to conduct a regulatory impact analysis does not
apply if the head of the agency ``certifies that the rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities.'' 5 U.S.C. 605(b). The agency must, however, publish
the certification in the Federal Register at the time of publication of
the rule, ``along with a statement providing the factual basis for such
certification.'' If the agency head has not waived the requirements for
a regulatory flexibility analysis in accordance with the RFA's waiver
provision, and no other RFA exception applies, the agency must prepare
the regulatory flexibility analysis and publish it in the Federal
Register at the time of promulgation or, if the rule is promulgated in
response to an emergency that makes timely compliance impracticable,
within 180 days of publication of the final rule. 5 U.S.C. 604(a),
608(b).
Rules that are exempt from notice and comment are also exempt from
the RFA requirements, including conducting a regulatory flexibility
analysis, when among other things the agency for good cause finds that
notice and public procedure are impracticable, unnecessary, or contrary
to the public interest. Small Business Administration's Office of
Advocacy guide: How to Comply with the Regulatory Flexibility Ac. Ch.1.
p.9. Accordingly, SBA is not required to conduct a regulatory
flexibility analysis.
Authority: 15 U.S.C. 636(a)(36); Coronavirus Aid, Relief, and
Economic Security Act, Public Law 116-136, Section 1114.
Jovita Carranza,
Administrator.
[FR Doc. 2020-07672 Filed 4-10-20; 4:15 pm]
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