PPP Updates By Date

May 13 - Loan Reporting and Other Updates

There has finally been movement on the loan reporting issue, as bankers were provided the following guidance by Colson Services, which typically processes 1502 Reports for the SBA. Lenders must first enroll for access to the service by following the directions below:

PPP Lender users who do not already have a dashboard account with the FTA can enroll by sending an email to Enrollment@colsonservices.com that contains the following:

  • Name of institution.
  • At least two of the following:
  1. E-Tran Main Location ID (CAFS Location ID under which loans were originated);
  2. One SBA PPP GP loan number assigned to a loan made by Lender; and
  3. Colson Lender ID (if known).
  • Individual user contact information (include in the body of the email, separate from signature block):
  1. Name;
  2. Email address; and
  3. Phone number.

A full set of instructions is available online.

Other Updates

Interim Final Rule Issued on Loan Increases
Late this afternoon, an additional Interim Final Rule was issued on loan increases under the PPP. IBAT has pulled out the pertinent sections of the IFR and included them in this document. The full IFR is also available to download.

SBA Grants Safe Harbor on Loans < $2 Million
The SBA/Treasury FAQs on the PPP loans were updated May 13 to add item 46. In a nutshell, it gives a “safe harbor” on loans in an original principal amount of less than $2 million, concluding that such borrowers are deemed to have made the required certification concerning the necessity of the loan in good faith. Basically, SBA just doesn’t have the resources to audit the multitude of smaller loans. Also, this FAQ recognizes that smaller businesses likely do not have access to other sources of liquidity as would be true for public companies. Finally, the FAQ promotes economic certainty and should facilitate smaller businesses in their efforts to retain and/or rehire employees.

This does not change the fact that loans over $2 million are subject to review to verify the certification of need. Remember that May 14 is the last day for such borrowers to repay in full and avoid potential liability!

Click here to view the latest version of the Treasury FAQ.

FDIC Proposed Rule on Deposit Insurance Assessment Effects of PPP
The FDIC issued a proposed rule earlier this week to address effects of participation in the PPP, the PPP Lending Facility (PPPLF) and the Money Market Mutual Fund Liquidity Facility (MMLF) on deposit insurance assessments. Absent a change to the assessment rules, an insured depository institution that participates in the PPP, PPPLF or MMLF programs could be subject to increased deposit insurance assessments. The proposed rule would:

  1. Remove the effect of participation in the PPP and PPPLF on various risk measures used to calculate an IDI’s assessment rate;
  2. Remove the effect of participation in the PPPLF and MMLF programs on certain adjustments to an IDI’s assessment rate;
  3. Provide an offset to an IDI’s assessment for the increase to its assessment base attributable to participation in the MMLF and PPPLF; and
  4. Remove the effect of participation in the PPPLF and MMLF programs when classifying IDIs as small, large or highly complex for assessment purposes.

To provide certainty to IDIs regarding the assessment effects of participating in these programs, the FDIC is proposing an effective date by June 30, 2020 and an application date of April 1, 2020, which would ensure that the changes are applied to assessments starting in the second quarter of 2020.

Comments on the proposed rule will be accepted for seven days after publication in the Federal Register.

April 27 - IFR Issued on Criteria for Seasonal Employees

The Treasury Department has issued an interim final rule establishing criteria for the counting of seasonal employees in the calculation of a company's Paycheck Protection Program loan amount.

In the original PPP rulemaking, seasonal employers could calculate their maximum loan amount using the monthly average payments for payroll during the 12 week period beginning February 15, 2019 or at the election of the eligible borrower, March 1, 2019 and ending June 30, 2019. This meant employers with seasons that occur later in the year would be unable to obtain funding commensurate with those available to winter and spring seasonal businesses. The new IFR issued today supplements the original rules as follows:

  • Seasonal employers may elect to use any consecutive 12 week period between May 1, 2019 and September 1, 2019 for maximum loan amount calculation.
  • Seasonal businesses which were dormant on February 15, 2020 but were in operation for any 8 week period between May 1, 2019 and September 1, 2019 are eligible for the PPP.

In addition, the newest guidance confirms that other rules and guidance already issued are otherwise unaffected and all lenders who are authorized under the PPP are authorized to offer these terms to eligible borrowers.

April 26 - FAQ - Part Time Employee Counts for Determining Borrower Eligibility

An additional question was added to the Treasury Department FAQ answering the question:

To determine borrower eligibility under the 500-employee or other applicable threshold established by the CARES Act, must a borrower count all employees or only full-time equivalent employees?

The answer clarifies that, for purposes of eligibility, the count includes all full and part time employees. However, for purposes of loan forgiveness, the CARES Act uses the standard "full-time equivalent employees" to determine the extent to which the loan forgiveness amount will be reduced in the event of workforce reductions.

April 25 - Resource - How to Calculate Maximum Loan Amounts - By Business Type

The Treasury Department released another guidance document to assist in the administration of the Paycheck Protection Program, "How to Calculate Maximum Loan Amounts - By Business Type."

The document provides step-by-step calculation methodology for the following:

  • A self-employed individual with no employees;
  • A self-employed individual with employees;
  • A self-employed individual who reports income on IRS Form 1040, Schedule F;
  • Partnerships;
  • S Corporations;
  • Eligible non-profit organizations;
  • Eligible non-profit religious institutions, veterans organizations and tribal businesses;
  • LLCs.

April 24 - FAQ - Four New Questions Added

The Treasury Department also updated its PPP FAQs with additional questions addressing:

  • Housing allowance as a payroll cost;
  • Employee principal place of residence information;
  • Ag, farm and ranch eligibility for PPP; and
  • Ag and other cooperatives eligibility for PPP.

April 24 - IFR Issues on Promissory Notes, Authorizations, Affiliation and Eligibility

The Treasury Department issued an Interim Final Rule on Promissory Notes, Authorizations, Affiliation and Eligibility. The IFR answers the following questions:

  • Is a hedge fund or private equity firm eligible for a PPP loan?
  • Do the SBA affiliation rules prohibit a portfolio company of a private equity fund from being eligible for a PPP loan?
  • Is a hospital owned by governmental entities eligible for a PPP loan?
  • Are businesses that receive revenue from legal gaming eligible for a PPP Loan?
  • Does participation in an employee stock ownership plan (ESOP) trigger application of the affiliation rules?
  • Will I be approved for a PPP loan if my business is in bankruptcy?

April 17 - PPP Liquidity Facility Now Operational

The Federal Reserve has announced that the the Paycheck Protection Program Liquidity Facility (PPPLF) is now operational and processing loans for eligible financial institutions. As indicated earlier this week, details of the program are available on the Fed’s website.

IBAT has been attempting to soften the language in the Borrower Certification form stating, “Borrower must certify that it is unable to secure adequate credit accommodations from other banking institutions.” This certification language is required by law in the Federal Reserve Act, Section 13(3) and based upon further analysis and discussion of this concern at the Fed, it was determined that there was no flexibility to adjust this language in the agreement.

There was additional clarifying language added to the FAQs intended to add some comfort for those banks concerned with certifying this particular provision. The new addition states, “In particular, a PPPLF participant may rely on the fact that the Board of Governors authorized the establishment of the PPPLF to improve the ability of PPP lenders to obtain reasonably priced long-term financing for PPP Loans.”

While not the solution we were hoping for, we appreciate the efforts of the Fed to provide this clarifying language in the FAQs. We will continue to explore options and are hopeful that community banks will be able to take advantage of this important liquidity facility going forward.

April 15 - FAQ - E-Signatures/E-Consents

The Treasury Department's has updated its Frequently Asked Questions document.

The additional question provides guidance on the acceptable use of scanned copies of documents and e-signatures/e-consents permitted by the E-sign Act.

 

April 14 - IFR on Additional Eligibility Criteria and Requirements for Certain Pledges of Loans

The Treasury Department issued additional guidance on Paycheck Protection Program (PPP) loans to independent contractors and bank directors. This came in the form of a new Interim Final Rule on “Additional Eligibility Criteria and Requirements for Certain Pledges of Loans."

The IFR Provided guidance on:

  • Loan eligibility, calculation, documentation and uses of funds for borrowers who are self-employed and file a Form 1040, Schedule C;
  • Forgiveness calucation and documentation for borrowers who are self-employed and file a Form 1040, Schedule C;
  • Eligibility of bank directors to apply for PPP loans with the lender with which they are associated;
  • Eligibility of businesses that receive revenue from legal gaming to receive PPP loans; and
  • Requirements for certain pledges of PPP loans.

April 9 - FAQ - Promissory Notes and 10 Day Funding

The Treasury Department issued revised FAQs with two new questions as part of the guidance document for the Paycheck Protection Program (PPP).

These questions addressed two ongoing concerns:

  • It made allowance for lenders to use their own promissory note or SBA Note 147.
  • It provided guidance that the first disbursement of the loan must occur no later than 10 calendar days from the date of loan approval.

IBAT has prepared a new resource to assist you in ensuring that your own promissory note addresses specific PPP concerns. That resource is now available to download as a PDF here or Word version here.

April 2 - IFR on Paycheck Protection Program

The interim final rule for the Paycheck Protection Program (PPP) was released to the public. Since then, the IBAT staff has been hard at work reviewing and analyzing the rule to provide as much clarity as possible for the expected launch of the PPP on Friday, April 3, 2020. Our goal is to provide meaningful information and tools for you to navigate this very complex and rapidly changing scenario.

For your use and convenience, we have developed:

  • full breakdown of the interim final rule, which includes a list of ongoing concerns and several questions that are, as yet, unanswered; and
  • An FAQ document on the PPP based on questions received earlier this week in IBAT's COVID-19 War Room, updated with information from the interim final rule.

March 31 - Overview of Paycheck Protection Program

The Treasury Department released additional information related to the Paycheck Protection Program (PPP) approved under the CARES Act. Below is a summary of the most important updates included in this information. There are still unanswered questions but some clarification is provided in this round of information, and we will continue to push information out to you as soon as it becomes available.

 

Overview of the Program (Click Here)

IMPORTANT UPDATES INCLUDE:

  • Only 25 percent of the amount forgiven can consist of costs not defined as payroll costs.
  • Beginning April 3, small businesses and sole proprietorships can apply through any existing SBA 7(a) lender.
  • Beginning April 10, independent contractors and self-employed individuals can apply through any existing SBA 7(a) lender.
  • Other lenders will be available to make these loans once they are approved and enrolled in the program. No definitive information about how to get approved other than for lenders to send for approval application to DelegatedAuthority@sba.gov.

Lender Information (Click Here)

IMPORTANT UPDATES INCLUDE:

  • All existing SBA-certified lenders will be given delegated authority to speedily process PPP loans.
  • Additional lenders can begin making loans as soon as they are approved and enrolled in the program. No definitive information about how to get approved other than for lenders to send application to DelegatedAuthority@sba.gov.
  • Underwriting requirements include:
    • Verification borrower was in operation on February 15, 2020.
    • Verification that a borrower has employees for whom the borrower paid salary and payroll taxes.
    • Verification of dollar amount of average monthly payroll costs.
    • BSA requirements must be followed.
  • Processing fees will be paid to lenders as follows:
  • Loans $350,000 and under - 5 percent
  • Loans greater than $350,000 to $2 million - 3 percent
  • Loans greater than $2 million - 1 percent
  • Agents, as authorized representatives of the lender, can be paid a fee but it must be paid out of the lender’s processing fee.

Borrower Information (Click Here)

IMPORTANT UPDATES INCLUDE:

  • The application for borrowers can be found here.
  • Only 25 percent of the amount forgiven can consist of costs not defined as payroll costs.
  • Beginning April 3, small businesses and sole proprietorships can apply through any existing SBA 7(a) lender.
  • Beginning April 10, independent contractors and self-employed individuals can apply through any existing SBA 7(a) lender.
  • Payroll documentation will be required.
  • Terms:
    • Interest rate -.5 percent
    • First payment due date is deferred for six months but interest will accrue during this period.
    • Loan Maturity - two years
  • Certification by the borrower of the following is required:
  • Current economic uncertainty makes the loan necessary to support your ongoing operations.
  • The funds will be used to retain workers and maintain payroll or to make mortgage, lease and utility payments.
  • You have not and will not receive another loan under this program.
  • You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments and covered utilities for the eight weeks after getting this loan.
  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments and covered utilities. Due to likely high subscription, it is anticipated that not more than 25 percent of the forgiven amount may be for non-payroll costs.
  • All the information you provide in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
  • You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge and agree that the lender can share the tax information with the 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 review.