WASHINGTON—Credit unions are being urged to be aware of two new updates related to the Paycheck Protection Program, while separately the Federal Reserve also announced it has expanded access to its Paycheck Protection Program Liquidity Facility (PPPLF) to additional lenders, and expanded the collateral that can be pledged.
The Small Business Administration (SBA) released two interim final rules clarifying disbursements and seasonal employees under the PPP.
Under one interim rule, the SBA indicated that the disbursement of PPP loans must be one-time and made within 10 calendar days of the loan approval. For loans that received an SBA loan number prior to the rule and have not been fully disbursed, the ten-day period begins on April 28. For 1502 reporting, lenders must upload the SBA form within 20 days after the PPP loan is approved. A lender must also report through the E-Tran system or the 1502 report any PPP loans that were cancelled before disbursement or voluntarily terminated and repaid. The SBA will provide further information on access and instructions to complete the reporting.
The second interim rule allows lenders to use alternative criteria for calculating the maximum loan amount for PPP loans issued to seasonal employers.
The SBA also added an additional question to its FAQs for lenders and borrowers regarding applications from private companies that own businesses.
‘Access’ is Critical Issue
NAFCU noted Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza have also reiterated their commitment to ensuring PPP loans are limited to eligible borrowers in a joint statement, committing to review all loans about $2 million.
In efforts to "to ensure access to the PPP loan program for the smallest lenders and their small business customers," the SBA only allowed lenders with less than $1 billion in assets to submit loan applications for an eight-hour window. The SBA and Treasury said they will evaluate the process to determine whether to pursue more time reservations for smaller lenders in the future.
NAFCU said it has also released updated PPP FAQs addressing new guidance regarding disbursements, payment of fees to lenders, and loans to board members. The FAQs also discuss the NCUA's interim final rule and letter to credit unions on the PPP.
Expanded PPPLF Access
Separately, the Federal Reserve also announced it has expanded access to its Paycheck Protection Program Liquidity Facility (PPPLF) to additional lenders, and expanded the collateral that can be pledged. The changes will facilitate lending to small businesses via the Small Business Administration's (SBA) Paycheck Protection Program (PPP), the Fed said.
As a result of the changes, all PPP lenders approved by the SBA, including non-depository institution lenders, are now eligible to participate in the PPPLF.
In addition, the Fed said eligible borrowers will be able to pledge whole PPP loans that they have purchased as collateral to the PPPLF. An institution that pledges a purchased PPP loan will need to provide the Reserve Bank with documentation from the SBA demonstrating that the pledging institution is the beneficiary of the SBA guarantee for the loan.
Further details on the PPPLF are available here