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SBA Issues Procedural Notice on Paycheck Protection Program (PPP) Loan Servicing Responsibilities and PPP Guaranty Purchase Process for PPP Lenders
Practical Law Legal Update w-032-0182 (Approx. 4 pages)
SBA Issues Procedural Notice on Paycheck Protection Program (PPP) Loan Servicing Responsibilities and PPP Guaranty Purchase Process for PPP Lenders
by Practical Law Finance
| Published on 22 Jul 2021 • USA (National/Federal) |
The Small Business Administration (SBA) issued a procedural notice to remind Paycheck Protection Program (PPP) lenders of their PPP loan servicing responsibilities. It also advised PPP lenders of the guaranty purchase process for the SBA to honor its 100% guaranty on a PPP loan.
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) offered loans under the Paycheck Protection Program (PPP). On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. L. 116-260) was enacted to extend the PPP and authorize the SBA to guarantee additional PPP loans (Second Draw PPP Loans) to eligible borrowers. On March 30, 2021, the PPP Extension Act of 2021 (Extension Act) extended the SBA’s authority to guarantee PPP loans through June 30, 2021. For more information on SBA interim final rules outlining the key provisions for implementing the PPP, see Practice Notes, Road Map to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act): Paycheck Protection Program and Road Map to the Consolidated Appropriations Act, 2021: Paycheck Protection Program.
On July 15, 2021, the SBA issued Procedural Notice 5000-812316 (Notice) to remind PPP lenders of their PPP loan servicing responsibilities and to advise PPP lenders of the guaranty purchase process for the SBA to honor its 100% guaranty on a PPP loan.
The Notice covers the following:
- Lenders' servicing responsibilities for PPP Loans.
- What lenders should do if the PPP borrower files for bankruptcy.
- Circumstances under which PPP lenders may simultaneously request a PPP guaranty purchase and charge-off.
- Circumstances under which lenders may request a PPP guaranty purchase (without charge-off).
- Steps lenders should take if the PPP borrower submits a PPP loan forgiveness application after the lender has requested a PPP guaranty purchase.
- The procedure for submitting requests for PPP guaranty purchases and charge-offs.
- Certifications required from PPP lenders.
- Where to direct questions or report fraud, waste or abuse to the SBA.