Business Loan Program Temporary Changes; Paycheck Protection Program-SBA Loan Review Procedures and Related Borrower and Lender Responsibilities, 33010-33015 [2020-11533]
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Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations
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 a new reporting
requirement on borrowers who request
forgiveness of their PPP loan. SBA has
developed Form 3508, Paycheck
Protection Program—Loan Forgiveness
Application, for use in collecting the
information required to determine
whether a borrower is eligible for loan
forgiveness. SBA obtained approval of
Form 3508 from the Office of
Management and Budget (OMB) as a
modification to the existing PPP
collection of information (OMB Control
Number (3245–0407). This collection of
information was approved under
emergency procedures to facilitate
immediate implementation of the PPP
and expires on October 31, 2020.
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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
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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. SBA Office of
Advocacy guide: How to Comply with
the Regulatory Flexibility Act, Ch.1. p.9.
Accordingly, SBA is not required to
conduct a regulatory flexibility analysis.
Jovita Carranza,
Administrator Small Business
Administration.
Michael Faulkender,
Assistant Secretary for Economic Policy,
Department of the Treasury.
[FR Doc. 2020–11536 Filed 5–28–20; 8:45 am]
BILLING CODE 8026–03–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket Number SBA–2020–0033]
RIN 3245–AH47
Business Loan Program Temporary
Changes; Paycheck Protection
Program—SBA Loan Review
Procedures and Related Borrower and
Lender Responsibilities
U.S. Small Business
Administration.
ACTION: Interim final rule.
AGENCY:
On April 2, 2020, the U.S.
Small Business Administration (SBA)
posted an interim final rule announcing
the implementation of the Coronavirus
Aid, Relief, and Economic Security Act
(CARES Act). The CARES Act
temporarily adds a new program, titled
the ‘‘Paycheck Protection Program,’’ to
the SBA’s 7(a) Loan Program. The
CARES Act also provides for forgiveness
SUMMARY:
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of up to the full principal amount of
qualifying loans guaranteed under the
Paycheck Protection Program (PPP). The
PPP is intended to provide economic
relief to small businesses nationwide
adversely impacted by the Coronavirus
Disease 2019 (COVID–19). SBA posted
additional interim final rules on April 3,
2020, April 14, 2020, April 24, 2020,
April 28, 2020, April 30, 2020, May 5,
2020, May 8, 2020, May 13, 2020, May
14, 2020, May 18, 2020, and May 20,
2020, and the Department of the
Treasury (Treasury) posted an
additional interim final rule on April
27, 2020. SBA and Treasury posted an
interim final rule on Loan Forgiveness
contemporaneously with this interim
final rule on May 22, 2020. This interim
final rule supplements the previously
posted interim final rules in order to
inform borrowers and lenders of SBA’s
process for reviewing PPP loan
applications and loan forgiveness
applications, and requests public
comment.
DATES:
Effective date: This rule is effective
May 28, 2020.
Applicability date: This interim final
rule applies to loan applications and
loan forgiveness applications submitted
under the Paycheck Protection Program.
Comment date: Comments must be
received on or before July 1, 2020.
ADDRESSES: You may submit comments,
identified by number SBA–2020–0033
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: A
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
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Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations
Columbia. With the COVID–19
emergency, many small businesses
nationwide are experiencing economic
hardship as a direct result of the
Federal, State, tribal, 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)
(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 CARES 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 CARES 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 CARES
Act provides for forgiveness of up to the
full principal amount of qualifying
loans guaranteed under the Paycheck
Protection Program, and requires SBA to
issue guidance and regulations
implementing section 1106 within 30
days after the date of enactment of the
CARES Act. On April 2, 2020, SBA
posted its first PPP interim final rule (85
FR 20811) (the First Interim Final Rule)
covering in part loan forgiveness. On
April 8, 2020 and on April 26, 2020,
SBA posted Frequently Asked
Questions on loan forgiveness.1 On
April 14, 2020, SBA posted another PPP
interim final rule (85 FR 21747)
covering in part loan forgiveness. On
April 24, 2020, the President signed the
Paycheck Protection Program and
Health Care Enhancement Act (Pub. L.
116–139), which provided additional
funding and authority for the Paycheck
Protection Program.
As described below, this interim final
rule informs borrowers and lenders of
SBA’s process for reviewing PPP loan
applications and loan forgiveness
1 https://www.sba.gov/document/support-faqlenders-borrowers.
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applications. This interim final rule
supplements the interim final rule on
Loan Forgiveness posted
contemporaneously with this interim
final rule.
II. Comments and Immediate Effective
Date
The intent of the CARES 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, it is critical to meet
lenders’ and borrowers’ need for clarity
concerning loan forgiveness
requirements as rapidly as possible
because borrowers can seek loan
forgiveness as early as eight-weeks
following the date of disbursement of
their PPP loans. Because the first PPP
loans were disbursed after April 3,
providing borrowers with certainty on
SBA’s process for reviewing PPP loan
applications and loan forgiveness
applications will enhance borrowers’
ability to determine whether, and to
what extent, they should apply for PPP
loans and loan forgiveness, and thereby
carry out the purposes of the CARES Act
in keeping their workers employed and
paid, while at the same time taking
necessary steps to maximize eligible
loan forgiveness amounts. An
immediate effective date also is
necessary for PPP lenders who generally
will make the loan forgiveness
determinations, as provided in the
CARES Act. Specifically, an immediate
effective date is necessary for lenders so
that they will have both a degree of
certainty and sufficient time to develop
their systems and policies and
procedures in order to timely process
loan forgiveness applications.
This interim final rule supplements
previous regulations and guidance on
the discrete issues related to SBA’s
process for review of PPP loan
applications and loan forgiveness
applications. This interim final rule is
effective without advance notice and
public comment because section 1114 of
the CARES Act authorizes SBA to issue
regulations to implement Title I of the
CARES Act without regard to notice
requirements. In addition, SBA has
determined that there is good cause for
dispensing with advance public notice
and comment on the ground that it
would be contrary to the public interest.
Specifically, SBA has determined that
advance notice and public comment
would delay the ability of PPP
borrowers to understand with certainty
SBA’s process for reviewing PPP loan
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applications and loan forgiveness
applications. By providing a high degree
of certainty to PPP borrowers through
this interim final rule, PPP borrowers
will be able to take immediate steps to
maximize their loan forgiveness
amounts. This rule is being issued to
allow for immediate implementation of
the forgiveness component of this
program. Although this interim final
rule is effective immediately, comments
are solicited from interested members of
the public on all aspects of this interim
final rule, including section III below.
These comments must be submitted on
or before July 1, 2020. SBA will
consider these comments and the need
for making any revisions as a result of
these comments.
III. Paycheck Protection Program
Requirements for SBA Loan Review
Procedures and Related Borrower and
Lender Responsibilities
Overview
The CARES Act was enacted to
provide immediate assistance to
individuals, families, and organizations
affected by the COVID–19 emergency.
Among the provisions contained in the
CARES Act are provisions authorizing
SBA to temporarily guarantee loans
under the Paycheck Protection Program
(PPP). Loans under the PPP will be 100
percent guaranteed by SBA, and the full
principal amount of the loans may
qualify for loan forgiveness. Additional
information about the PPP is available
in interim final rules published by SBA
and Treasury in the Federal Register (85
FR 20811, 85 FR 20817, 85 FR 21747,
85 FR 23450, 85 FR 23917, 85 FR 26321,
85 FR 26324, 85 FR 27287, 85 FR 29842,
85 FR 29845, 85 FR 29847, 85 FR
30835), as well as an SBA interim final
rule posted on May 20, 2020 and an
SBA and Treasury interim final rule
posted on May 22, 2020 (collectively,
the PPP Interim Final Rules).
Under the CARES Act, SBA is
authorized to guarantee loans under the
PPP, a new temporary 7(a) program,
through June 30, 2020. 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.
The Small Business Act authorizes
the Administrator to conduct
investigations to determine whether a
recipient or participant in any
assistance under a 7(a) program,
including the PPP, is ineligible for a
loan, or has violated section 7(a), or any
rule, regulation or order issued
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thereunder. 15 U.S.C. 634(b)(11).
Additionally, under section 7(a), the
Administrator is empowered to make
loans in cooperation with lenders
through agreements to participate on a
deferred (guaranteed) basis. 15 U.S.C.
636(a). Further, the Administrator may
make such rules and regulations as
deemed necessary and take any and all
actions determined to be necessary or
desirable with respect to 7(a) loans. 15
U.S.C. 634(b)(6) and (b)(7). Pursuant to
these provisions of the Small Business
Act, SBA has issued regulations
establishing the standards by which it
will investigate whether a loan met
program requirements and the
circumstances under which SBA will be
released from liability on a guarantee for
such a loan. 13 CFR 120.524.
In light of the structure of the PPP
program established by the CARES Act
and the PPP Interim Final Rules, in
which loans and loan forgiveness are
provided based on the borrower’s
certifications and documentation
provided by the borrower, the
Administrator, in consultation with the
Secretary of the Treasury (Secretary),
has determined that it is appropriate to
adopt additional procedures and criteria
through which SBA will review whether
an action by the borrower has resulted
in its receipt of a PPP loan that did not
meet program requirements.2 SBA’s
review of borrower certifications and
representations regarding the borrower’s
eligibility for a PPP loan and loan
forgiveness, and the borrower’s use of
PPP loan proceeds, is essential to ensure
that PPP loans are directed to the
entities Congress intended, and that PPP
loan proceeds are used for the purposes
Congress required, including the CARES
Act’s central purpose of keeping
workers paid and employed.
1. SBA Reviews of Individual PPP Loans
a. Will SBA review individual PPP
loans?
Yes. SBA may review any PPP loan,
as the Administrator deems appropriate,
as described below.
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b. What borrower representations and
statements will SBA review?
The Administrator is authorized to
review the following:
Borrower Eligibility: The
Administrator may review whether a
borrower is eligible for the PPP loan
based on the provisions of the CARES
2 This interim final rule is an exercise of SBA’s
rulemaking authority under 15 U.S.C. 634(b), 15
U.S.C. 633(d), and 5 U.S.C. App., Reorg. Plan No.
4 of 1965, 11(b), 13(a) (abolishing Loan Policy
Board and transferring functions to the
Administrator); and CARES Act sections 1106(k)
and 1114.
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Act, the rules and guidance available at
the time of the borrower’s PPP loan
application, and the terms of the
borrower’s loan application. See FAQ 17
(posted April 6, 2020).3 These include,
but are not limited to, SBA’s regulations
under 13 CFR 120.110 (as modified and
clarified by the PPP Interim Final Rules)
and 13 CFR 121.301(f) and the
information, certifications, and
representations on the Borrower
Application Form (SBA Form 2483 or
lender’s equivalent form) and Loan
Forgiveness Application Form (SBA
Form 3508 or lender’s equivalent form).
Loan Amounts and Use of Proceeds:
The Administrator may review whether
a borrower calculated the loan amount
correctly and used loan proceeds for the
allowable uses specified in the CARES
Act.
Loan Forgiveness Amounts: CThe
Administrator may review whether a
borrower is entitled to loan forgiveness
in the amount claimed on the
borrower’s Loan Forgiveness
Application (SBA Form 3508 or lender’s
equivalent form).
c. When will SBA undertake a loan
review?
For a PPP loan of any size, SBA may
undertake a review at any time in SBA’s
discretion. For example, SBA may
review a loan if the loan documentation
submitted to SBA by the lender or any
other information indicates that the
borrower may be ineligible for a PPP
loan, or may be ineligible to receive the
loan amount or loan forgiveness amount
claimed by the borrower. 13 CFR
120.524(c). As noted on the Loan
Forgiveness Application Form, the
borrower must retain PPP
documentation in its files for six years
after the date the loan is forgiven or
repaid in full, and permit authorized
representatives of SBA, including
representatives of its Office of Inspector
General, to access such files upon
request.
Lenders must comply with applicable
SBA requirements for records retention,
which for Federally regulated lenders
means compliance with the
requirements of their federal financial
institution regulator and for SBA
supervised lenders (as defined in 13
CFR 120.10 and including PPP lenders
with authority under SBA Form 3507)
means compliance with 13 CFR
120.461.
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d. Will I have the opportunity to
respond to SBA’s questions in a review?
Yes. If loan documentation submitted
to SBA by the lender or any other
information indicates that the borrower
may be ineligible for a PPP loan or may
be ineligible to receive the loan amount
or loan forgiveness amount claimed by
the borrower, SBA will require the
lender to contact the borrower in
writing to request additional
information. SBA may also request
information directly from the borrower.
The lender will provide any additional
information provided to it by the
borrower to SBA. SBA will consider all
information provided by the borrower in
response to such an inquiry.
Failure to respond to SBA’s inquiry
may result in a determination that the
borrower was ineligible for a PPP loan
or ineligible to receive the loan amount
or loan forgiveness amount claimed by
the borrower.
e. If SBA determines that a borrower is
ineligible for a PPP loan, can the loan
be forgiven?
No. If SBA determines that a borrower
is ineligible for the PPP loan, SBA will
direct the lender to deny the loan
forgiveness application. Further, if SBA
determines that the borrower is
ineligible for the loan amount or loan
forgiveness amount claimed by the
borrower, SBA will direct the lender to
deny the loan forgiveness application in
whole or in part, as appropriate. SBA
may also seek repayment of the
outstanding PPP loan balance or pursue
other available remedies.
Section 1106(b) of the CARES Act
provides for forgiveness of a PPP loan
only if the borrower is an ‘‘eligible
recipient.’’ The Administrator has
determined that to be an eligible
recipient that is entitled to forgiveness
under section 1106(b), the borrower
must be an ‘‘eligible recipient’’ under 15
U.S.C. 636(a)(36)(A)(iv) and rules and
guidance available at the time of the
borrower’s loan application. This
requirement promotes the public
interest, aligns SBA’s functions with
other governmental policies, and
appropriately carries out the CARES
Act’s PPP provisions, including by
preventing evasion of the requirements
for PPP loan eligibility and ensuring
program integrity with respect to this
emergency financial assistance program.
It is also consistent with the CARES
Act’s nonrecourse provision, 15 U.S.C.
636(a)(36)(F)(v), which limits SBA’s
recourse against individual
shareholders, members, or partners of a
PPP borrower for nonpayment of a PPP
loan only if the borrower is an eligible
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recipient of the loan. Accordingly, the
PPP Loan Forgiveness Application (SBA
Form 3508 or lender’s equivalent form)
notes that SBA may direct a lender to
disapprove a borrower’s loan
forgiveness application if SBA
determines that the borrower does not
qualify as an eligible recipient for the
PPP loan.
f. May a borrower appeal SBA’s
determination that the borrower is
ineligible for a PPP loan or ineligible for
the loan amount or the loan forgiveness
amount claimed by the borrower?
Yes. SBA intends to issue a separate
interim final rule addressing this
process.
2. The Loan Forgiveness Process for
Lenders
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a. What should a lender review?
For all PPP Loan Forgiveness
Applications, each lender shall:
i. Confirm receipt of the borrower
certifications contained in the Loan
Forgiveness Application Form.
ii. Confirm receipt of the
documentation borrowers must submit
to aid in verifying payroll and
nonpayroll costs, as specified in the
instructions to the Loan Forgiveness
Application Form.
iii. Confirm the borrower’s
calculations on the borrower’s Loan
Forgiveness Application, including the
dollar amount of the (A) Cash
Compensation, Non-Cash
Compensation, and Compensation to
Owners claimed on Lines 1, 4, 6, 7, 8,
and 9 on PPP Schedule A and (B)
Business Mortgage Interest Payments,
Business Rent or Lease Payments, and
Business Utility Payments claimed on
Lines 2, 3, and 4 on the PPP Loan
Forgiveness Calculation Form, by
reviewing the documentation submitted
with the Loan Forgiveness Application.
iv. Confirm that the borrower made
the calculation on Line 10 of the Loan
Forgiveness Calculation Form correctly,
by dividing the borrower’s Eligible
Payroll Costs claimed on Line 1 by 0.75.
Providing an accurate calculation of
the loan forgiveness amount is the
responsibility of the borrower, and the
borrower attests to the accuracy of its
reported information and calculations
on the Loan Forgiveness Application.
Lenders are expected to perform a goodfaith review, in a reasonable time, of the
borrower’s calculations and supporting
documents concerning amounts eligible
for loan forgiveness. For example,
minimal review of calculations based on
a payroll report by a recognized thirdparty payroll processor would be
reasonable. By contrast, if payroll costs
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are not documented with such
recognized sources, more extensive
review of calculations and data would
be appropriate. The borrower shall not
receive forgiveness without submitting
all required documentation to the
lender.
As the First Interim Final Rule 4
indicates, lenders may rely on borrower
representations. If the lender identifies
errors in the borrower’s calculation or
material lack of substantiation in the
borrower’s supporting documents, the
lender should work with the borrower
to remedy the issue. As stated in
paragraph III.3.c of the First Interim
Final Rule, the lender does not need to
independently verify the borrower’s
reported information if the borrower
submits documentation supporting its
request for loan forgiveness and attests
that it accurately verified the payments
for eligible costs.
b. What is the timeline for the lender’s
decision on a loan forgiveness
application?
The lender must issue a decision to
SBA on a loan forgiveness application
not later than 60 days after receipt of a
complete loan forgiveness application
from the borrower. That decision may
take the form of an approval (in whole
or in part); denial; or (if directed by
SBA) a denial without prejudice due to
a pending SBA review of the loan for
which forgiveness is sought. In the case
of a denial without prejudice, the
borrower may subsequently request that
the lender reconsider its application for
loan forgiveness, unless SBA has
determined that the borrower is
ineligible for a PPP loan. The
Administrator has determined that this
process appropriately balances the need
for efficient processing of loan
forgiveness applications with
considerations of program integrity,
including affording SBA the
opportunity to ensure that borrower
representations and certifications
(including concerning eligibility for a
PPP loan) were accurate.
When the lender issues its decision to
SBA approving the application (in
whole or in part), it must include (1) the
PPP Loan Forgiveness Calculation Form;
(2) PPP Schedule A; and (3) the
(optional) PPP Borrower Demographic
Information Form (if submitted to the
lender). The lender must confirm that
the information provided by the lender
to SBA accurately reflects lender’s
records for the loan, and that the lender
has made its decision in accordance
with the requirements set forth in 2.a. If
the lender determines that the borrower
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33013
is entitled to forgiveness of some or all
of the amount applied for under the
statute and applicable regulations, the
lender must request payment from SBA
at the time the lender issues its decision
to SBA. SBA will, subject to any SBA
review of the loan or loan application,
remit the appropriate forgiveness
amount to the lender, plus any interest
accrued through the date of payment,
not later than 90 days after the lender
issues its decision to SBA. If applicable,
SBA will deduct EIDL Advance
Amounts from the forgiveness amount
remitted to the Lender as required by
section 1110(e)(6) of the CARES Act.
When the lender issues its decision to
SBA determining that the borrower is
not entitled to forgiveness in any
amount, the lender must provide SBA
with the reason for its denial, together
with (1) the PPP Loan Forgiveness
Calculation Form; (2) PPP Schedule A;
and (3) the (optional) PPP Borrower
Demographic Information Form (if
submitted to the lender). The lender
must confirm that the information
provided by the lender to SBA
accurately reflects lender’s records for
the loan, and that the lender has made
its decision in accordance with the
requirements set forth in 2.a. The lender
must also notify the borrower in writing
that the lender has issued a decision to
SBA denying the loan forgiveness
application. SBA reserves the right to
review the lender’s decision in its sole
discretion. Within 30 days of notice
from the lender, a borrower may request
that SBA review the lender’s decision
by reviewing the loan in accordance
with 2.c. below.
Enabling SBA to use the statutory 90day period to review the PPP loan and
forgiveness documentation is an
appropriate procedural protection to
prevent fraud or misuse of PPP funds,
ensure that recipients of PPP loans are
within the scope of entities that the
CARES Act is intended to assist, and
confirm compliance with the PPP
requirements set forth in the statute,
rules, and guidance. This protection is
also important in light of the large
number and diverse types of PPP
lenders, many of which were not
previously SBA participating lenders
and which were approved rapidly in
order to enable financial assistance to be
provided as rapidly as feasible to
millions of small businesses. SBA will
use the 90-day period to help ensure
that applicable legal requirements have
been satisfied.
SBA will issue additional procedures
on the process for advance purchase of
PPP loans.
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c. What should a lender do if it receives
notice that SBA is reviewing a loan?
SBA may begin a review of any PPP
loan of any size at any time in SBA’s
discretion. If SBA undertakes such a
review, SBA will notify the lender in
writing and the lender must notify the
borrower in writing within five business
days of receipt.
Within five business days of receipt of
such notice, the lender shall transmit to
SBA electronic copies of the following:
i. The Borrower Application Form
(SBA Form 2483 or lender’s equivalent
form) and all supporting documentation
provided by the borrower.
ii. The Loan Forgiveness Application
(SBA Form 3508 or lender’s equivalent
form), and all supporting
documentation provided by the
borrower (if the lender has received
such application). If the lender receives
such application after it receives notice
that SBA has commenced a loan review,
the lender shall transmit electronic
copies of the application and all
supporting documentation provided by
the borrower to SBA within five
business days of receipt. The lender
must also request that the borrower
provide the lender with a copy of the
Schedule A Worksheet to the Loan
Forgiveness Application, and the lender
must submit the worksheet to SBA
within 5 business days of receipt from
the borrower.
iii. A signed and certified transcript of
account.
iv. A copy of the executed note
evidencing the PPP loan.
v. Any other documents related to the
loan requested by SBA.
If SBA has notified the lender that
SBA has commenced a loan review, the
lender shall not approve any application
for loan forgiveness for such loan until
SBA notifies the lender in writing that
SBA has completed its review.
3. Lender Fees
a. Is the lender eligible for a processing
fee if SBA determines that a borrower is
ineligible?
No. If SBA conducts a loan review
and determines that the borrower was
ineligible for a PPP loan, the lender is
not eligible for a processing fee.
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b. Are lender processing fees subject to
clawback if SBA determines that a
borrower is ineligible?
Yes. For any SBA-reviewed PPP loan,
if within one year after the loan was
disbursed SBA determines that a
borrower was ineligible for a PPP loan
based on the provisions of the CARES
Act or applicable rules or guidance
available at the time of the borrower’s
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16:09 May 29, 2020
Jkt 250001
loan application, or the terms of the
loan application, SBA will seek
repayment of the lender processing fee
from the lender. However, SBA’s
determination of borrower eligibility
will have no effect on SBA’s guaranty of
the loan if the lender has complied with
its obligations under section III.3.b of
the First Interim Final Rule and the
document collection and retention
requirements described in the lender
application form (SBA Form 2484).
c. Are lender processing fees subject to
clawback if a lender has not fulfilled its
obligations under PPP regulations?
Yes. If a lender fails to satisfy the
requirements applicable to lenders that
are set forth in section III.3.b of the First
Interim Final Rule or the document
collection and retention requirements
described in the lender application form
(SBA Form 2484), SBA will seek
repayment of the lender processing fee
from the lender and may determine that
the loan is not eligible for a guaranty.
4. Additional Information
SBA may provide further guidance, if
needed, through SBA notices that will
be posted on SBA’s website at
www.sba.gov. Questions on the
Paycheck Protection Program 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.
Compliance With Executive Orders
12866, 12988, 13132, 13563, and 13771,
the Paperwork Reduction Act (44
U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601–612)
Executive Orders 12866, 13563, and
13771
This interim final rule is
economically significant for the
purposes of Executive Orders 12866 and
13563, and is considered a major rule
under the Congressional Review Act.
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.
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.
PO 00000
Frm 00038
Fmt 4700
Sfmt 4700
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 a new reporting
requirement on the lenders that are
participating in the PPP. As discussed
above, when a lender approves or
denies a request for loan forgiveness, the
lender must submit to SBA limited
information from the borrower’s Loan
Forgiveness Application (SBA Form
3508 or lender’s equivalent form),
including the portion of the form used
to calculate the total amount to be
forgiven, as well as the schedule used to
determine the borrower’s payroll
expenses. In addition, for those loans
that SBA selects for review, the
applicable lenders will be required to
submit information to allow SBA to
review the loans for borrower eligibility,
loan amount eligibility, and loan
forgiveness eligibility. SBA will submit
the new reporting requirements to OMB
for approval as a modification to the
existing PPP information collection.
This information collection is currently
approved as an emergency request
under OMB Control Number 3245–0407
until October 31, 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
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Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations
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. SBA Office of
Advocacy guide: How to Comply with
the Regulatory Flexibility Act, Ch.1. p.9.
Accordingly, SBA is not required to
conduct a regulatory flexibility analysis.
Jovita Carranza,
Administrator.
[FR Doc. 2020–11533 Filed 5–28–20; 8:45 am]
BILLING CODE 8026–03–P
CONSUMER PRODUCT SAFETY
COMMISSION
16 CFR Part 1253
[Docket No. CPSC–2019–0023]
Children’s Toys and Child Care
Articles: Determinations Regarding
ASTM F963 Elements and Phthalates
for Unfinished Manufactured Fibers
U.S. Consumer Product Safety
Commission.
ACTION: Final rule.
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AGENCY:
The Consumer Product Safety
Commission (CPSC) is issuing a final
rule determining that certain unfinished
manufactured fibers do not contain the
ASTM F963 elements or specified
phthalates that exceed the limits set
SUMMARY:
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16:09 May 29, 2020
Jkt 250001
forth under the CPSC’s statutes and
regulations for children’s toys and child
care articles. Based on these
determinations, the specified unfinished
manufactured fibers would not be
required to have third party testing for
compliance with the requirements of the
ASTM F963 elements or phthalates for
children’s toys and child care articles.
DATES: The rule is effective on July 1,
2020.
FOR FURTHER INFORMATION CONTACT:
Stephen W. Lee, Compliance Officer,
Office of Compliance and Field
Operations, U.S. Consumer Product
Safety Commission, 4330 East West
Highway, Bethesda, MD 20814–4408:
telephone 301–504–7814; email: slee@
cpsc.gov.
SUPPLEMENTARY INFORMATION:
A. Background
1. Third Party Testing and Burden
Reduction
Section 14(a) of the Consumer
Product Safety Act (CPSA), as amended
by the Consumer Product Safety
Improvement Act of 2008 (CPSIA),
requires that manufacturers of products
subject to a consumer product safety
rule or similar rule, ban, standard, or
regulation enforced by the CPSC, must
certify that the product complies with
all applicable CPSC-enforced
requirements. 15 U.S.C. 2063(a). For
children’s products, certification must
be based on testing conducted by a
CPSC-accepted third party conformity
assessment body. Id. Public Law 112–28
(August 12, 2011) directed the CPSC to
seek comment on ‘‘opportunities to
reduce the cost of third party testing
requirements consistent with assuring
compliance with any applicable
consumer product safety rule, ban,
standard, or regulation.’’ Public Law
112–28 also authorized the Commission
to issue new or revised third party
testing regulations if the Commission
determines ‘‘that such regulations will
reduce third party testing costs
consistent with assuring compliance
with the applicable consumer product
safety rules, bans, standards, and
regulations.’’ Id. 2063(d)(3)(B).
To provide opportunities to reduce
the cost of third party testing
requirements consistent with assuring
compliance with any applicable
consumer product safety rule, ban,
standard, or regulations, the CPSC
assessed whether children’s toys and
child care articles manufactured with
seven manufactured fibers: polyester
(polyethylene terephthalate (PET)),
nylon, polyurethane (spandex), viscose
rayon, natural rubber latex, acrylic, and
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Frm 00039
Fmt 4700
Sfmt 4700
33015
modacrylic, would comply with CPSC’s
requirements for ASTM F963 elements
or phthalates. The Commission
determines that such materials will
comply with CPSC’s requirements with
a high degree of assurance. Therefore,
manufacturers do not need to have those
materials tested by a third party testing
laboratory in order to issue a Children’s
Product Certificate (CPC).
2. ASTM F963 Elements
Section 106 of the CPSIA provides
that the provisions of ASTM
International, Consumer Safety
Specifications for Toy Safety (ASTM
F963), shall be considered to be
consumer product safety standards
issued by the Commission.1 15 U.S.C.
2056b. The Commission has issued a
rule that incorporates by reference the
relevant provisions of ASTM F963 at 16
CFR part 1250.2 Thus, children’s toys
subject to ASTM F963 must be tested by
a CPSC-accepted third party laboratory
and demonstrate compliance with all
applicable CPSC requirements for the
manufacturer to issue a CPC before the
children’s toys can be entered into
commerce.
Section 4.3.5 of ASTM F963 requires
that surface coating materials and
accessible substrates of children’s toys
that can be sucked, mouthed, or
ingested 3 must comply with the
solubility limits of eight elements given
in Table 1 of the toy standard. The
materials and their solubility limits are
shown in Table 1. We refer to these
eight elements as ‘‘ASTM F963
elements.’’
1 ASTM F963 is a consumer product safety
standard, except for section 4.2 and Annex 4, or any
provision that restates or incorporates an existing
mandatory standard or ban promulgated by the
Commission or by statute.
2 The Commission is not incorporating ASTM
F963 by reference into part 1253.
3 ASTM F963 contains the following note
regarding the scope of the solubility requirement:
NOTE 4—For the purposes of this requirement, the
following criteria are considered reasonably
appropriate for the classification of children’s toys
or parts likely to be sucked, mouthed or ingested:
(1) All toy parts intended to be mouthed or contact
food or drink, components of children’s toys which
are cosmetics, and components of writing
instruments categorized as children’s toys; (2)
Children’s toys intended for children less than 6
years of age, that is, all accessible parts and
components where there is a probability that those
parts and components may come into contact with
the mouth.
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]]>Agencies
[Federal Register Volume 85, Number 105 (Monday, June 1, 2020)]
[Rules and Regulations]
[Pages 33010-33015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11533]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket Number SBA-2020-0033]
RIN 3245-AH47
Business Loan Program Temporary Changes; Paycheck Protection
Program--SBA Loan Review Procedures and Related Borrower and Lender
Responsibilities
AGENCY: U.S. Small Business Administration.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA)
posted an interim final rule announcing the implementation of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The
CARES Act temporarily adds a new program, titled the ``Paycheck
Protection Program,'' to the SBA's 7(a) Loan Program. The CARES Act
also provides for forgiveness of up to the full principal amount of
qualifying loans guaranteed under the Paycheck Protection Program
(PPP). The PPP is intended to provide economic relief to small
businesses nationwide adversely impacted by the Coronavirus Disease
2019 (COVID-19). SBA posted additional interim final rules on April 3,
2020, April 14, 2020, April 24, 2020, April 28, 2020, April 30, 2020,
May 5, 2020, May 8, 2020, May 13, 2020, May 14, 2020, May 18, 2020, and
May 20, 2020, and the Department of the Treasury (Treasury) posted an
additional interim final rule on April 27, 2020. SBA and Treasury
posted an interim final rule on Loan Forgiveness contemporaneously with
this interim final rule on May 22, 2020. This interim final rule
supplements the previously posted interim final rules in order to
inform borrowers and lenders of SBA's process for reviewing PPP loan
applications and loan forgiveness applications, and requests public
comment.
DATES:
Effective date: This rule is effective May 28, 2020.
Applicability date: This interim final rule applies to loan
applications and loan forgiveness applications submitted under the
Paycheck Protection Program.
Comment date: Comments must be received on or before July 1, 2020.
ADDRESSES: You may submit comments, identified by number SBA-2020-0033
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: A 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
[[Page 33011]]
Columbia. With the COVID-19 emergency, many small businesses nationwide
are experiencing economic hardship as a direct result of the Federal,
State, tribal, 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) (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 CARES 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 CARES 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 CARES Act provides for forgiveness of up to the full principal
amount of qualifying loans guaranteed under the Paycheck Protection
Program, and requires SBA to issue guidance and regulations
implementing section 1106 within 30 days after the date of enactment of
the CARES Act. On April 2, 2020, SBA posted its first PPP interim final
rule (85 FR 20811) (the First Interim Final Rule) covering in part loan
forgiveness. On April 8, 2020 and on April 26, 2020, SBA posted
Frequently Asked Questions on loan forgiveness.\1\ On April 14, 2020,
SBA posted another PPP interim final rule (85 FR 21747) covering in
part loan forgiveness. On April 24, 2020, the President signed the
Paycheck Protection Program and Health Care Enhancement Act (Pub. L.
116-139), which provided additional funding and authority for the
Paycheck Protection Program.
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As described below, this interim final rule informs borrowers and
lenders of SBA's process for reviewing PPP loan applications and loan
forgiveness applications. This interim final rule supplements the
interim final rule on Loan Forgiveness posted contemporaneously with
this interim final rule.
II. Comments and Immediate Effective Date
The intent of the CARES 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, it is critical to meet
lenders' and borrowers' need for clarity concerning loan forgiveness
requirements as rapidly as possible because borrowers can seek loan
forgiveness as early as eight-weeks following the date of disbursement
of their PPP loans. Because the first PPP loans were disbursed after
April 3, providing borrowers with certainty on SBA's process for
reviewing PPP loan applications and loan forgiveness applications will
enhance borrowers' ability to determine whether, and to what extent,
they should apply for PPP loans and loan forgiveness, and thereby carry
out the purposes of the CARES Act in keeping their workers employed and
paid, while at the same time taking necessary steps to maximize
eligible loan forgiveness amounts. An immediate effective date also is
necessary for PPP lenders who generally will make the loan forgiveness
determinations, as provided in the CARES Act. Specifically, an
immediate effective date is necessary for lenders so that they will
have both a degree of certainty and sufficient time to develop their
systems and policies and procedures in order to timely process loan
forgiveness applications.
This interim final rule supplements previous regulations and
guidance on the discrete issues related to SBA's process for review of
PPP loan applications and loan forgiveness applications. This interim
final rule is effective without advance notice and public comment
because section 1114 of the CARES Act authorizes SBA to issue
regulations to implement Title I of the CARES Act without regard to
notice requirements. In addition, SBA has determined that there is good
cause for dispensing with advance public notice and comment on the
ground that it would be contrary to the public interest. Specifically,
SBA has determined that advance notice and public comment would delay
the ability of PPP borrowers to understand with certainty SBA's process
for reviewing PPP loan applications and loan forgiveness applications.
By providing a high degree of certainty to PPP borrowers through this
interim final rule, PPP borrowers will be able to take immediate steps
to maximize their loan forgiveness amounts. This rule is being issued
to allow for immediate implementation of the forgiveness component of
this program. Although this interim final rule is effective
immediately, comments are solicited from interested members of the
public on all aspects of this interim final rule, including section III
below. These comments must be submitted on or before July 1, 2020. SBA
will consider these comments and the need for making any revisions as a
result of these comments.
III. Paycheck Protection Program Requirements for SBA Loan Review
Procedures and Related Borrower and Lender Responsibilities
Overview
The CARES Act was enacted to provide immediate assistance to
individuals, families, and organizations affected by the COVID-19
emergency. Among the provisions contained in the CARES Act are
provisions authorizing SBA to temporarily guarantee loans under the
Paycheck Protection Program (PPP). Loans under the PPP will be 100
percent guaranteed by SBA, and the full principal amount of the loans
may qualify for loan forgiveness. Additional information about the PPP
is available in interim final rules published by SBA and Treasury in
the Federal Register (85 FR 20811, 85 FR 20817, 85 FR 21747, 85 FR
23450, 85 FR 23917, 85 FR 26321, 85 FR 26324, 85 FR 27287, 85 FR 29842,
85 FR 29845, 85 FR 29847, 85 FR 30835), as well as an SBA interim final
rule posted on May 20, 2020 and an SBA and Treasury interim final rule
posted on May 22, 2020 (collectively, the PPP Interim Final Rules).
Under the CARES Act, SBA is authorized to guarantee loans under the
PPP, a new temporary 7(a) program, through June 30, 2020. 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.
The Small Business Act authorizes the Administrator to conduct
investigations to determine whether a recipient or participant in any
assistance under a 7(a) program, including the PPP, is ineligible for a
loan, or has violated section 7(a), or any rule, regulation or order
issued
[[Page 33012]]
thereunder. 15 U.S.C. 634(b)(11). Additionally, under section 7(a), the
Administrator is empowered to make loans in cooperation with lenders
through agreements to participate on a deferred (guaranteed) basis. 15
U.S.C. 636(a). Further, the Administrator may make such rules and
regulations as deemed necessary and take any and all actions determined
to be necessary or desirable with respect to 7(a) loans. 15 U.S.C.
634(b)(6) and (b)(7). Pursuant to these provisions of the Small
Business Act, SBA has issued regulations establishing the standards by
which it will investigate whether a loan met program requirements and
the circumstances under which SBA will be released from liability on a
guarantee for such a loan. 13 CFR 120.524.
In light of the structure of the PPP program established by the
CARES Act and the PPP Interim Final Rules, in which loans and loan
forgiveness are provided based on the borrower's certifications and
documentation provided by the borrower, the Administrator, in
consultation with the Secretary of the Treasury (Secretary), has
determined that it is appropriate to adopt additional procedures and
criteria through which SBA will review whether an action by the
borrower has resulted in its receipt of a PPP loan that did not meet
program requirements.\2\ SBA's review of borrower certifications and
representations regarding the borrower's eligibility for a PPP loan and
loan forgiveness, and the borrower's use of PPP loan proceeds, is
essential to ensure that PPP loans are directed to the entities
Congress intended, and that PPP loan proceeds are used for the purposes
Congress required, including the CARES Act's central purpose of keeping
workers paid and employed.
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\2\ This interim final rule is an exercise of SBA's rulemaking
authority under 15 U.S.C. 634(b), 15 U.S.C. 633(d), and 5 U.S.C.
App., Reorg. Plan No. 4 of 1965, 11(b), 13(a) (abolishing Loan
Policy Board and transferring functions to the Administrator); and
CARES Act sections 1106(k) and 1114.
---------------------------------------------------------------------------
1. SBA Reviews of Individual PPP Loans
a. Will SBA review individual PPP loans?
Yes. SBA may review any PPP loan, as the Administrator deems
appropriate, as described below.
b. What borrower representations and statements will SBA review?
The Administrator is authorized to review the following:
Borrower Eligibility: The Administrator may review whether a
borrower is eligible for the PPP loan based on the provisions of the
CARES Act, the rules and guidance available at the time of the
borrower's PPP loan application, and the terms of the borrower's loan
application. See FAQ 17 (posted April 6, 2020).\3\ These include, but
are not limited to, SBA's regulations under 13 CFR 120.110 (as modified
and clarified by the PPP Interim Final Rules) and 13 CFR 121.301(f) and
the information, certifications, and representations on the Borrower
Application Form (SBA Form 2483 or lender's equivalent form) and Loan
Forgiveness Application Form (SBA Form 3508 or lender's equivalent
form).
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\3\ https://www.sba.gov/document/support--faq-lenders-borrowers.
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Loan Amounts and Use of Proceeds: The Administrator may review
whether a borrower calculated the loan amount correctly and used loan
proceeds for the allowable uses specified in the CARES Act.
Loan Forgiveness Amounts: CThe Administrator may review whether a
borrower is entitled to loan forgiveness in the amount claimed on the
borrower's Loan Forgiveness Application (SBA Form 3508 or lender's
equivalent form).
c. When will SBA undertake a loan review?
For a PPP loan of any size, SBA may undertake a review at any time
in SBA's discretion. For example, SBA may review a loan if the loan
documentation submitted to SBA by the lender or any other information
indicates that the borrower may be ineligible for a PPP loan, or may be
ineligible to receive the loan amount or loan forgiveness amount
claimed by the borrower. 13 CFR 120.524(c). As noted on the Loan
Forgiveness Application Form, the borrower must retain PPP
documentation in its files for six years after the date the loan is
forgiven or repaid in full, and permit authorized representatives of
SBA, including representatives of its Office of Inspector General, to
access such files upon request.
Lenders must comply with applicable SBA requirements for records
retention, which for Federally regulated lenders means compliance with
the requirements of their federal financial institution regulator and
for SBA supervised lenders (as defined in 13 CFR 120.10 and including
PPP lenders with authority under SBA Form 3507) means compliance with
13 CFR 120.461.
d. Will I have the opportunity to respond to SBA's questions in a
review?
Yes. If loan documentation submitted to SBA by the lender or any
other information indicates that the borrower may be ineligible for a
PPP loan or may be ineligible to receive the loan amount or loan
forgiveness amount claimed by the borrower, SBA will require the lender
to contact the borrower in writing to request additional information.
SBA may also request information directly from the borrower. The lender
will provide any additional information provided to it by the borrower
to SBA. SBA will consider all information provided by the borrower in
response to such an inquiry.
Failure to respond to SBA's inquiry may result in a determination
that the borrower was ineligible for a PPP loan or ineligible to
receive the loan amount or loan forgiveness amount claimed by the
borrower.
e. If SBA determines that a borrower is ineligible for a PPP loan, can
the loan be forgiven?
No. If SBA determines that a borrower is ineligible for the PPP
loan, SBA will direct the lender to deny the loan forgiveness
application. Further, if SBA determines that the borrower is ineligible
for the loan amount or loan forgiveness amount claimed by the borrower,
SBA will direct the lender to deny the loan forgiveness application in
whole or in part, as appropriate. SBA may also seek repayment of the
outstanding PPP loan balance or pursue other available remedies.
Section 1106(b) of the CARES Act provides for forgiveness of a PPP
loan only if the borrower is an ``eligible recipient.'' The
Administrator has determined that to be an eligible recipient that is
entitled to forgiveness under section 1106(b), the borrower must be an
``eligible recipient'' under 15 U.S.C. 636(a)(36)(A)(iv) and rules and
guidance available at the time of the borrower's loan application. This
requirement promotes the public interest, aligns SBA's functions with
other governmental policies, and appropriately carries out the CARES
Act's PPP provisions, including by preventing evasion of the
requirements for PPP loan eligibility and ensuring program integrity
with respect to this emergency financial assistance program. It is also
consistent with the CARES Act's nonrecourse provision, 15 U.S.C.
636(a)(36)(F)(v), which limits SBA's recourse against individual
shareholders, members, or partners of a PPP borrower for nonpayment of
a PPP loan only if the borrower is an eligible
[[Page 33013]]
recipient of the loan. Accordingly, the PPP Loan Forgiveness
Application (SBA Form 3508 or lender's equivalent form) notes that SBA
may direct a lender to disapprove a borrower's loan forgiveness
application if SBA determines that the borrower does not qualify as an
eligible recipient for the PPP loan.
f. May a borrower appeal SBA's determination that the borrower is
ineligible for a PPP loan or ineligible for the loan amount or the loan
forgiveness amount claimed by the borrower?
Yes. SBA intends to issue a separate interim final rule addressing
this process.
2. The Loan Forgiveness Process for Lenders
a. What should a lender review?
For all PPP Loan Forgiveness Applications, each lender shall:
i. Confirm receipt of the borrower certifications contained in the
Loan Forgiveness Application Form.
ii. Confirm receipt of the documentation borrowers must submit to
aid in verifying payroll and nonpayroll costs, as specified in the
instructions to the Loan Forgiveness Application Form.
iii. Confirm the borrower's calculations on the borrower's Loan
Forgiveness Application, including the dollar amount of the (A) Cash
Compensation, Non-Cash Compensation, and Compensation to Owners claimed
on Lines 1, 4, 6, 7, 8, and 9 on PPP Schedule A and (B) Business
Mortgage Interest Payments, Business Rent or Lease Payments, and
Business Utility Payments claimed on Lines 2, 3, and 4 on the PPP Loan
Forgiveness Calculation Form, by reviewing the documentation submitted
with the Loan Forgiveness Application.
iv. Confirm that the borrower made the calculation on Line 10 of
the Loan Forgiveness Calculation Form correctly, by dividing the
borrower's Eligible Payroll Costs claimed on Line 1 by 0.75.
Providing an accurate calculation of the loan forgiveness amount is
the responsibility of the borrower, and the borrower attests to the
accuracy of its reported information and calculations on the Loan
Forgiveness Application. Lenders are expected to perform a good-faith
review, in a reasonable time, of the borrower's calculations and
supporting documents concerning amounts eligible for loan forgiveness.
For example, minimal review of calculations based on a payroll report
by a recognized third-party payroll processor would be reasonable. By
contrast, if payroll costs are not documented with such recognized
sources, more extensive review of calculations and data would be
appropriate. The borrower shall not receive forgiveness without
submitting all required documentation to the lender.
As the First Interim Final Rule \4\ indicates, lenders may rely on
borrower representations. If the lender identifies errors in the
borrower's calculation or material lack of substantiation in the
borrower's supporting documents, the lender should work with the
borrower to remedy the issue. As stated in paragraph III.3.c of the
First Interim Final Rule, the lender does not need to independently
verify the borrower's reported information if the borrower submits
documentation supporting its request for loan forgiveness and attests
that it accurately verified the payments for eligible costs.
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\4\ 85 FR 20811, 20815-20816 (April 15, 2020).
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b. What is the timeline for the lender's decision on a loan forgiveness
application?
The lender must issue a decision to SBA on a loan forgiveness
application not later than 60 days after receipt of a complete loan
forgiveness application from the borrower. That decision may take the
form of an approval (in whole or in part); denial; or (if directed by
SBA) a denial without prejudice due to a pending SBA review of the loan
for which forgiveness is sought. In the case of a denial without
prejudice, the borrower may subsequently request that the lender
reconsider its application for loan forgiveness, unless SBA has
determined that the borrower is ineligible for a PPP loan. The
Administrator has determined that this process appropriately balances
the need for efficient processing of loan forgiveness applications with
considerations of program integrity, including affording SBA the
opportunity to ensure that borrower representations and certifications
(including concerning eligibility for a PPP loan) were accurate.
When the lender issues its decision to SBA approving the
application (in whole or in part), it must include (1) the PPP Loan
Forgiveness Calculation Form; (2) PPP Schedule A; and (3) the
(optional) PPP Borrower Demographic Information Form (if submitted to
the lender). The lender must confirm that the information provided by
the lender to SBA accurately reflects lender's records for the loan,
and that the lender has made its decision in accordance with the
requirements set forth in 2.a. If the lender determines that the
borrower is entitled to forgiveness of some or all of the amount
applied for under the statute and applicable regulations, the lender
must request payment from SBA at the time the lender issues its
decision to SBA. SBA will, subject to any SBA review of the loan or
loan application, remit the appropriate forgiveness amount to the
lender, plus any interest accrued through the date of payment, not
later than 90 days after the lender issues its decision to SBA. If
applicable, SBA will deduct EIDL Advance Amounts from the forgiveness
amount remitted to the Lender as required by section 1110(e)(6) of the
CARES Act.
When the lender issues its decision to SBA determining that the
borrower is not entitled to forgiveness in any amount, the lender must
provide SBA with the reason for its denial, together with (1) the PPP
Loan Forgiveness Calculation Form; (2) PPP Schedule A; and (3) the
(optional) PPP Borrower Demographic Information Form (if submitted to
the lender). The lender must confirm that the information provided by
the lender to SBA accurately reflects lender's records for the loan,
and that the lender has made its decision in accordance with the
requirements set forth in 2.a. The lender must also notify the borrower
in writing that the lender has issued a decision to SBA denying the
loan forgiveness application. SBA reserves the right to review the
lender's decision in its sole discretion. Within 30 days of notice from
the lender, a borrower may request that SBA review the lender's
decision by reviewing the loan in accordance with 2.c. below.
Enabling SBA to use the statutory 90-day period to review the PPP
loan and forgiveness documentation is an appropriate procedural
protection to prevent fraud or misuse of PPP funds, ensure that
recipients of PPP loans are within the scope of entities that the CARES
Act is intended to assist, and confirm compliance with the PPP
requirements set forth in the statute, rules, and guidance. This
protection is also important in light of the large number and diverse
types of PPP lenders, many of which were not previously SBA
participating lenders and which were approved rapidly in order to
enable financial assistance to be provided as rapidly as feasible to
millions of small businesses. SBA will use the 90-day period to help
ensure that applicable legal requirements have been satisfied.
SBA will issue additional procedures on the process for advance
purchase of PPP loans.
[[Page 33014]]
c. What should a lender do if it receives notice that SBA is reviewing
a loan?
SBA may begin a review of any PPP loan of any size at any time in
SBA's discretion. If SBA undertakes such a review, SBA will notify the
lender in writing and the lender must notify the borrower in writing
within five business days of receipt.
Within five business days of receipt of such notice, the lender
shall transmit to SBA electronic copies of the following:
i. The Borrower Application Form (SBA Form 2483 or lender's
equivalent form) and all supporting documentation provided by the
borrower.
ii. The Loan Forgiveness Application (SBA Form 3508 or lender's
equivalent form), and all supporting documentation provided by the
borrower (if the lender has received such application). If the lender
receives such application after it receives notice that SBA has
commenced a loan review, the lender shall transmit electronic copies of
the application and all supporting documentation provided by the
borrower to SBA within five business days of receipt. The lender must
also request that the borrower provide the lender with a copy of the
Schedule A Worksheet to the Loan Forgiveness Application, and the
lender must submit the worksheet to SBA within 5 business days of
receipt from the borrower.
iii. A signed and certified transcript of account.
iv. A copy of the executed note evidencing the PPP loan.
v. Any other documents related to the loan requested by SBA.
If SBA has notified the lender that SBA has commenced a loan
review, the lender shall not approve any application for loan
forgiveness for such loan until SBA notifies the lender in writing that
SBA has completed its review.
3. Lender Fees
a. Is the lender eligible for a processing fee if SBA determines that a
borrower is ineligible?
No. If SBA conducts a loan review and determines that the borrower
was ineligible for a PPP loan, the lender is not eligible for a
processing fee.
b. Are lender processing fees subject to clawback if SBA determines
that a borrower is ineligible?
Yes. For any SBA-reviewed PPP loan, if within one year after the
loan was disbursed SBA determines that a borrower was ineligible for a
PPP loan based on the provisions of the CARES Act or applicable rules
or guidance available at the time of the borrower's loan application,
or the terms of the loan application, SBA will seek repayment of the
lender processing fee from the lender. However, SBA's determination of
borrower eligibility will have no effect on SBA's guaranty of the loan
if the lender has complied with its obligations under section III.3.b
of the First Interim Final Rule and the document collection and
retention requirements described in the lender application form (SBA
Form 2484).
c. Are lender processing fees subject to clawback if a lender has not
fulfilled its obligations under PPP regulations?
Yes. If a lender fails to satisfy the requirements applicable to
lenders that are set forth in section III.3.b of the First Interim
Final Rule or the document collection and retention requirements
described in the lender application form (SBA Form 2484), SBA will seek
repayment of the lender processing fee from the lender and may
determine that the loan is not eligible for a guaranty.
4. Additional Information
SBA may provide further guidance, if needed, through SBA notices
that will be posted on SBA's website at www.sba.gov. Questions on the
Paycheck Protection Program 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.
Compliance With Executive Orders 12866, 12988, 13132, 13563, and 13771,
the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
Executive Orders 12866, 13563, and 13771
This interim final rule is economically significant for the
purposes of Executive Orders 12866 and 13563, and is considered a major
rule under the Congressional Review Act. 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.
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 a new reporting
requirement on the lenders that are participating in the PPP. As
discussed above, when a lender approves or denies a request for loan
forgiveness, the lender must submit to SBA limited information from the
borrower's Loan Forgiveness Application (SBA Form 3508 or lender's
equivalent form), including the portion of the form used to calculate
the total amount to be forgiven, as well as the schedule used to
determine the borrower's payroll expenses. In addition, for those loans
that SBA selects for review, the applicable lenders will be required to
submit information to allow SBA to review the loans for borrower
eligibility, loan amount eligibility, and loan forgiveness eligibility.
SBA will submit the new reporting requirements to OMB for approval as a
modification to the existing PPP information collection. This
information collection is currently approved as an emergency request
under OMB Control Number 3245-0407 until October 31, 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
[[Page 33015]]
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. SBA Office of Advocacy guide: How to Comply with the
Regulatory Flexibility Act, Ch.1. p.9. Accordingly, SBA is not required
to conduct a regulatory flexibility analysis.
Jovita Carranza,
Administrator.
[FR Doc. 2020-11533 Filed 5-28-20; 8:45 am]
BILLING CODE 8026-03-P
