SBA issued more guidance over the weekend around maximum loan amount calculations for this new round of PPP funding. In addition, SBA issued two procedural notices over the weekend to further clarify questions around the forgiveness process.
SBA MAXIMUM LOAN AMOUNT CALCULATION FAQs
The guidance around maximum loan amount calculations is helpful to interpret outstanding questions many of you had as I conducted our “PPP2021 – What’s Next” webinar on Thursday. It contains 14 FAQs and it is critical you promptly read through these ahead of any new applications you receive from borrowers. Importantly, the document states that borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation of the CARES Act, the Economic Aid Act, and of the Paycheck Protection Program Interim Final Rules. It further states that “The U.S. government will not challenge lender PPP actions that conform to this guidance and to the PPP Interim Final Rules and any subsequent rulemaking in effect at the time the action is taken.” Since this was issued tonight, it is guidance in effect now.
Most of the FAQs address how to calculate maximum loan amount based on the type of entity the borrower is, as well as scenarios where a business may not have been in existence for all of calendar year 2019. In addition, the guidance describes payroll costs using calendar year 2019 as the reference period for payroll costs used to calculate loan amounts. However, borrowers are permitted to use payroll costs from either calendar year 2019 or calendar year 2020 for their First Draw PPP Loan amount calculation. Documentation, including IRS forms, must be supplied for the selected reference period.
WBA will update its Master FAQ document soon; however, to read the full SBA FAQs, please go HERE.
SBA PROCEDURAL NOTICES
SBA issued two procedural notices earlier this weekend. The first Notice is to inform PPP lenders of (1) the process for borrower resubmission of loan forgiveness applications using PPP Loan Forgiveness Application Form 3508S (SBA Form 3508S); (2) lender responsibilities to notify borrowers of (a) lender decisions to deny forgiveness in full, (b) SBA loan review decisions and borrower appeal rights to SBA’s Office of Hearings and Appeals (OHA), and (c) SBA remittance of loan forgiveness payments; and (3) lender responsibilities in the event of offset of PPP remittances to lenders by the Treasury Offset Program (TOP).
Borrower Resubmission of a Loan Forgiveness Application using SBA Form 3508S
A borrower that is eligible to use SBA Form 3508S, but applied for loan forgiveness using PPP Loan Forgiveness Application Form 3508EZ or 3508, may resubmit its loan forgiveness application to its lender using SBA Form 3508S at any time until SBA notifies the lender of a final SBA loan review decision or remits to the lender the PPP loan forgiveness payment. If a lender receives a timely borrower resubmission of a loan forgiveness application using SBA Form 3508S, the lender should promptly request the withdrawal of any lender loan forgiveness decision by notifying SBA through the SBA Paycheck Protection Platform. Resubmissions after SBA notifies the lender of a final SBA loan review decision or remits to the lender the PPP loan forgiveness payment are not permitted. After a borrower’s resubmission of a complete loan forgiveness application, the lender must issue a decision to SBA on the new loan forgiveness application not later than 60 days after receipt of the complete loan forgiveness application. When the lender issues its forgiveness decision to SBA on the new loan forgiveness application, 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 forgiveness decision to SBA.
Lenders must keep borrowers informed of certain actions during the PPP loan forgiveness process. Specifically, lenders must notify borrowers in writing within 5 business days of any of the following:
- A decision by the lender to deny forgiveness in full.
- A decision by SBA declining a request for review by a borrower of a lender’s decision to deny forgiveness in full.
- A final SBA loan review decision, including an SBA loan review decision on forgiveness (whether approving or denying forgiveness in full or part).
- Remittance by SBA to the lender of the loan forgiveness amount, whether partial or full.
The information that lenders must include with their notifications to borrowers is further described in this Procedural Notice. After sending the notification to the borrower, the lender must upload a copy of the notification correspondence to the SBA Paycheck Protection Platform. Lenders must take care to avoid providing erroneous information to borrowers regarding requests for SBA review of lender loan forgiveness decisions or regarding borrower appeal rights, which are limited to certain specific circumstances, as described in the Procedural Notice.
TOP Offsets of Remittances to Lenders for Lender Debts
Forgiveness payment remittances made by SBA to lenders are subject to offset for delinquent debts registered with the Treasury Offset Program (TOP) that the lender owes to the United States, a State, the District of Columbia, Guam, the Virgin Islands, or Puerto Rico. If a lender has a debt that is active for collection in TOP, any forgiveness payments remitted by SBA to the lender will be offset until the lender’s debt has been paid in full or otherwise resolved. If an SBA forgiveness payment is offset, in whole or in part, the lender must credit the borrower’s PPP loan for the full amount of the funds that SBA approved for remittance to the lender (before offset) as set forth in the Payment Notice generated by the SBA Paycheck Protection Platform or SBA’s final loan review decision. After the loan has been credited, the lender must report the remaining amount of the loan, if any, on the next SBA Form 1502 Report submitted by the lender for the PPP loan. Lenders that fail to timely and properly credit a borrower’s PPP loan for the full amount of the funds that SBA approved for remittance to the lender (before offset) will be subject to SBA action, as appropriate. Lenders can obtain further information about their debts in the TOP through the Treasury Department’s website.
A copy of the full Procedural Notice is found HERE.
Procedural Notice – Excess Loan Amount Errors
This Notice informs PPP lenders of the effects of “excess loan amount errors” made by the borrower or the lender in completing the PPP Borrower Application Form (SBA Form 2483, SBA Form 2483-SD, or lender’s equivalent form) or the PPP Lender Application Form (SBA Form 2484 or SBA Form 2484-SD) for First Draw PPP Loans and Second Draw PPP Loans (collectively, “PPP loans”). An excess loan amount error is a borrower or lender error made in good faith that caused a borrower to receive a PPP loan amount that exceeds the borrower’s correct maximum loan amount under the CARES Act and the Economic Aid Act. An excess loan amount error does not include a knowing misstatement. Knowing misstatements may result in additional action, such as charges for fraud.
The Procedural Notice provides detailed explanations and examples of the implications of excess loan amount errors, and lenders should take time to review this notice in its entirety. Notably, if an excess loan amount error is due in whole or in part to the lender’s failure to satisfy its obligations under the PPP rules and the document collection and retention requirements described in the lender application form (SBA Form 2484 and SBA Form 2484-SD), the SBA guarantee will not apply to the excess loan amount.
A copy of the full Procedural Notice is found HERE.
By, Alex Paniagua