SBA Part Twenty-Four: Lenders Beware and Takeaways from the SBA’s Interim Final Rule Regarding Appeals of SBA PPP Loan Review Decisions
On Aug. 11, a new Interim Final Rule (IFR) RIN 3245-AH55 was released regarding the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) loan forgiveness appeals. The new rule amends a subpart of the Code of Federal Regulations (13 CFR Part 134). Most of this section only applies substantively to PPP borrowers and it discusses the appeals process at length for such borrowers. However, there are a few important items lenders should take note of:
- Lenders do not have standing to file an appeal under the new rule, only the borrowing entity does.
- A new provision is included that disallows borrowers from filing an appeal if the amount of loan forgiveness remitted matches the amount of loan forgiveness contained within the lender’s loan forgiveness decision provided to the SBA. This provision also states the borrower needs to begin repayment on any remaining balance that was not forgiven. Therefore, it is important to be sure that if a borrower’s loan forgiveness application’s loan forgiveness amount differs from what the lender is providing to the SBA that written contact be made with the borrower and that an explanation for the difference or denial of the loan forgiveness amount being provided to the SBA is given to the borrower. If not, this could lead to litigation against the lender because the PPP borrower’s appeal rights would be lost and the borrower would otherwise not have knowledge of this potential issue.
- This IFR does not apply to any other SBA loan.
Furthermore, there was the issuance of additional frequency asked questions (FAQs) in two documents:
SBA/Treasury PPP Loan FAQs
Number 50 on the Payment Protection Program Loans FAQ is pertinent to a lender and states that any agent fee disputes will not create an issue with the SBA’s payment of lender fees nor the SBA’s guarantee of a PPP loan.
SBA Loan Forgiveness FAQs
The FAQ document related to loan forgiveness was released initially on Aug. 4, but did not contain any “new” information. It simply provided information previously found in various IFRs, loan forgiveness instructions/application, and the FAQs, but packaged differently. It was updated on Aug. 11 to contain some information about the Economic Injury Disaster Loans (EIDL). Those FAQs essentially state that the lender can rely on the SBA to check and deduct any EIDL advance from the loan forgiveness it remits to the lender and states the lender will be able to confirm the same. Additionally, if the EIDL received is in excess of the PPP loan, none of the PPP loan will be forgiven and it will need to be repaid within the two or five-year time period, as applicable. The other FAQ for the EIDL contains information that has already been shared previously, that any loan forgiveness not remitted must be repaid in accordance with the PPP rules.
For further information, please contact any member of Taft’s SBA Task Force.
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