Guidance on the Paycheck Protection Program and Economic Injury Disaster Loans

The US Small Business Administration (SBA) and Treasury Department issued new FAQs on the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) as well as a new interim final rule on the appeals process.

Paycheck Protection Program FAQs

net operating lossesWhat effect does the payment or nonpayment of fees of an agent or other third party have on SBA’s guarantee of a PPP loan or SBA’s payment of fees to lenders?

The payment or nonpayment of fees of an agent or other third party is not material to SBA’s guarantee of a PPP loan or to SBA’s payment of fees to lenders. Additional information about such fees can be found in paragraph III.4.c of the initial Paycheck Protection Program interim final rule (link).

Do payments required for the provision of group health care benefits, including insurance premiums, include vision and dental benefits?

Yes

View the PPP FAQs here.

Economic Injury Disaster Loan FAQs

SBA will deduct the amount of any Economic Injury Disaster Loan (EIDL) advance received by a PPP borrower from the forgiveness amount remitted to the lender. How will a lender know the amount of the EIDL advance that will be automatically deducted by SBA?

If a borrower received an EIDL advance, SBA is required to reduce the borrower’s loan forgiveness amount by the amount of the EIDL advance. SBA will deduct the amount of the EIDL advance from the forgiveness amount remitted by SBA to the lender. The lender will be able to confirm the amount of the EIDL advance that will be automatically deducted by SBA from the forgiveness payment by reviewing the borrower’s EIDL advance information in the PPP Forgiveness Platform.

How should a lender handle any remaining balance due on a PPP loan after SBA remits the forgiveness amount to the lender?

If a PPP loan is not forgiven in full (including if there has been a reduction in the forgiveness amount for an EIDL advance), any remaining balance due on the PPP As of August 11, 2020 11 loan must be repaid by the borrower. The lender is responsible for notifying the borrower of the loan forgiveness amount remitted by SBA and the date on which the borrower’s first loan payment is due. The lender must continue to service the loan. The borrower must repay the remaining loan balance by the maturity date of the PPP loan (either two or five years). If a borrower is determined to have been ineligible for a PPP loan for any reason, SBA may seek repayment of the outstanding PPP loan balance or pursue other available remedies.

What should a lender do if a borrower received an EIDL advance in excess of the amount of its PPP loan?

A borrower that received an EIDL advance in excess of the amount of its PPP loan will not receive any forgiveness on the PPP loan, because the amount of an EIDL advance is deducted from the PPP loan forgiveness amount. The lender is responsible for notifying the borrower of the date on which the borrower’s first loan payment is due. The lender must continue to service the loan. The borrower must repay the remaining loan balance by the maturity date of the PPP loan (either two or five years). If a borrower is determined to have been ineligible for a PPP loan for any reason, SBA may seek repayment of the outstanding PPP loan balance or pursue other available remedies.

View the EIDL FAQs here.

Interim final rule

There is also a new interim final rule on appeals of certain loan review decisions, which permits a PPP borrower to request a review of a lender decision or an SBA decision that a borrower is ineligible for loan forgiveness. The interim final rule includes a walkthrough of the processes, documentation requirements, and time limits.

View the interim final rule on appeals of SBA loan review decisions here.

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