American Financial Services Association

SBA Updates Loan Guidelines

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SBA Updates Loan Guidelines

The Small Business Administration (SBA) in the past 48 hours has updated their guidelines for both the review and return of Paycheck Protection Program (PPP) loans in two FAQs.

FAQ 46 states that the SBA will consider any borrower that received a PPP loan with an original principal of less than $2 million to have made the required certification in good faith. The second, FAQ 47 moves the required repayment deadline from May 14, 2020 to May 18, 2020 for loans made under an existing safe harbor. The result of these two FAQS is that borrowers must decide to either repay loans larger than $2 million by May 18, 2020 or undergo the SBA’s “good-faith analysis.”

In other recent developments, a U.S. district court in Michigan issued a preliminary injunction barring the SBA from enforcing a rule to exclude businesses that present live performances or sell products of a “prurient sexual nature” from loans under the PPP. The judge also said the SBA cannot exclude other businesses, i.e. banks, because Congress intended to support all qualified small businesses, including those it might have “disfavored” before the coronavirus hit.

In addition, we’re awaiting a decision out of another U.S. district court in California. Payday Loan LLC, which engages in lending and check cashing in 22 stores in California, sued the SBA on April 25 after its request for a $644,000 forgivable loan was denied. The application was rejected on the grounds that PPP funds can’t be distributed to companies that profit mostly from making loans. A decision is expected soon. Read more about the cases in AFSA’s blog post on the matter.

AFSA will continue to work with the SBA to clarify the program and will ask for specific PPP clarification language in the next stimulus bill.

May 14th, 2020 by