ARLINGTON, Va.–A little more than a week into the deployment of the Paycheck Protection Program and answers to some of the many questions surrounding the $349-billion program have become clearer, while many others remain.
NAFCU EVP and General Counsel Carrie Hunt told CUToday.info the trade group has spent much of the first official week of the program in attempting to get direction from the Small Business Administration for the numerous questions credit unions—and the companies attempting to apply for funding—were asking.
“There are still some questions around why some have access, but others do not,” said Hunt. “There are questions around the types of documentation that need to be provided, such as for independent contractors. In these loans it’s up to the borrower to certify certain information.”
Hunt said many of the questions are similar to those any credit union would have with a new process or if they were new to the SBA’s 7(a) loans, but the PPP loans also contain numerous “particular” requirements.
Awaiting New Guidance
“The SBA has said it will be issuing some new guidance,” said Hunt. “And there are just some questions that are not going to be answered.”
One of the big questions surrounds the eligibility of business owners who also serve on the board of a credit union to apply for a PPP loan.
“This is a different type of situation,” noted Hunt. “They have existing regulations around what is a business concern. The rules for what is a business concern were written for a for-profit business. Now, with the CARES Act, the program is open to a nonprofit, but it’s not as if the SBA rules were written with credit unions in mind.”
One workaround, suggested Hunt, is to have credit unions assist board members with other credit unions—which would remove any relationship—in processing the loans.
The Fraud Risk
As CUToday.info reported here, some CUSOs have already expressed concern the PPP is ripe for fraud given the limited documentation and the speed with which loans are being processed.
Hunt agreed it’s a potential risk.
“The short answer is yes. These loans are 100% guaranteed, which is why credit unions are asking for the documentation,” said Hunt. “But the policy goal of the CARES Act is to get as much money out as possible during this crisis. In a lot of cases credit unions have existing relationships with these borrowers.”