Sean Bryan Authors Article on New PPP Rules

Sean Bryan’s column—entitled “Tightening the PPP Rules as the IRS Awakes”—addresses new Interim Final Rules regarding Payroll Protection Program (PPP) loans. 

Following new rules issued April 24 restricting eligibility for PPP loans, Treasury and SBA issued three new Interim Final Rules this week.

On April 27, the SBA provided guidance for seasonal employers regarding the maximum PPP loan they may obtain. The CARES Act permits a seasonal employee to use 2019’s payroll from February 15 or March 1, through June 30, 2019, and this new rule provides as an alternate the right to use any 12 week period between May 1-September 15, 2019.

On April 28, the SBA clarified that PPP loans may not be disbursed in multiple draws to play with the 8-week covered period.  Loans must be disbursed by lends within 10 days after the SBA has assigned a loan number to the loan; for undisbursed loans receiving a loan number before April 28, the 10-day period began April 28.  Lenders are not responsible if a borrower fails to timely provide loan documents, and a loan will be cancelled if not disbursed because the applicant failed to submit loan documents within 20 days after loan approval.  A provision set at the end of this Rule is that if a borrower is using part of the PPP loan to refinance an Economic Injury Disaster Loan, then such funds are to be sent directly to the SBA rather than the borrower.

On April 30, the SBA issued a rule intended to guide PPP funding to small businesses by limiting to $20 million the aggregate PPP loans that can be obtained by a single corporate group, defined as majority owned, directly or indirectly, by a common parent.  This applies to loan applications that were not disbursed as of that day, regardless of the location in the approval pipeline, and the onus of notifying a lender if this restriction affects an undisbursed loan is on the applicant, and the application is to be withdrawn or cancelled.  A loan in violation of this restriction will not be eligible for loan forgiveness.  This rule is in addition to the $10 million limit on individual loans, and applies even if the affiliation rules intended to restrict related groups from separately getting PPP loans would be waived for them by the CARES Act, or if the affiliation rules would not otherwise aggregate several borrowers.  As an unrelated issue addressed by this Rule, the SBA will permit a non-bank lender or non-insured deposit institution to be approved as a lender of PPP loans if it has originated, maintained or serviced more than $50 million in business loans during a 12-month period in the past 36 months.

For further information on the Payroll Protection Program, click on the link below.