SBA Issues Revised PPP Borrower Application Forms and Procedural Notice for Hold Codes and Compliance Check Error Messages for PPP Loans | Practical Law

SBA Issues Revised PPP Borrower Application Forms and Procedural Notice for Hold Codes and Compliance Check Error Messages for PPP Loans | Practical Law

The Small Business Administration (SBA) issued revised Borrower Application Forms for Paycheck Protection Program (PPP) borrowers. It also issued a procedural notice informing SBA employees and PPP lenders of new procedures to address SBA Hold Codes on first draw PPP loans and SBA Compliance Check Error Messages on first draw and second draw PPP loans.

SBA Issues Revised PPP Borrower Application Forms and Procedural Notice for Hold Codes and Compliance Check Error Messages for PPP Loans

by Practical Law Finance
Published on 18 Feb 2021USA (National/Federal)
The Small Business Administration (SBA) issued revised Borrower Application Forms for Paycheck Protection Program (PPP) borrowers. It also issued a procedural notice informing SBA employees and PPP lenders of new procedures to address SBA Hold Codes on first draw PPP loans and SBA Compliance Check Error Messages on first draw and second draw PPP loans.
On March 27, 2020, the US government passed the CARES Act in response to the COVID-19 crisis. Under the CARES Act, the Small Business Administration (SBA) is offering loans under the Paycheck Protection Program (PPP). On April 2, 2020, the SBA issued an interim final rule (Initial Rule) outlining the key provisions for implementing the PPP. Subsequently, the SBA has issued additional interim final rules (see Practice Note, Road Map to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act): Paycheck Protection Program).
On February 10, 2021, the SBA issued a procedural notice (Notice) informing SBA employees and PPP lenders of new procedures to address:
  • Second draw PPP loan (Second Draw PPP Loan) guaranty applications with an SBA hold code (Hold Code) on the borrower’s first draw PPP loan (First Draw PPP Loan).
  • First Draw PPP Loan guaranty applications and Second Draw PPP Loan guaranty applications with SBA compliance check error messages (Compliance Check Error Messages).

Hold Codes and Compliance Check Error Messages

The SBA screened all First Draw PPP Loans made in 2020 for potential noncompliance with PPP loan eligibility requirements, fraud, or abuse. It placed Hold Codes on certain 2020 First Draw PPP Loans where potential issues were indicated.
In addition, in 2021, the SBA is conducting initial front-end compliance checks on PPP lender loan guaranty applications for new First Draw PPP Loans and Second Draw PPP Loans. If an issue is identified, a Compliance Check Error Message is generated, which, in many cases, identifies the same issue as the Hold Codes.
The Notice outlines the procedures that will be taken when Hold Codes and Compliance Check Error Messages are present. It also provides PPP lenders with methods for assisting the SBA with the resolution of Hold Codes and Compliance Check Error Messages.

Revised Borrower Application Forms

On February 17, 2021, the SBA issued revised borrower application forms for PPP loan borrowers: