iThis past Friday and Sunday, the SBA released updated guidance on (a) calculating maximum loan amounts, (b) resubmissions of loan forgiveness applications and (c) the effects of excess loan amount errors on borrowers’ obligations, loan forgiveness, and the SBA’s guarantee of PPP loans.
Maximum Loan Amounts
The updated guidance provides additional clarification on how to calculate payroll costs. Similar to previous guidance, the guidance separates out the calculations by business entity type and focuses much of the calculation on tax returns. Additionally, the guidance provides two methods for calculating the maximum loan amount for business entities in operation on February 15, 2020, but not in operation between February 15, 2019, and June 30, 2019.
The full guidance can be found here.
Loan Forgiveness Resubmissions
The first SBA procedural notice clarifies that eligible borrowers who previously applied for loan forgiveness using application Form 3508EZ or Form 3508, may resubmit loan forgiveness applications to their lenders using Form 3508S. Eligible borrowers may do so at any time before their lender receives notification of a final SBA loan review decision or remittance of the PPP loan forgiveness payment.
The notice further details lenders’ obligations with respect to loan forgiveness resubmissions and keeping borrowers informed of certain actions during the PPP loan forgiveness process.
The full procedural notice can be found here.
Excess Loan Amount Errors
The second SBA procedural notice defines an excess loan amount error as a “borrower or lender error made in good faith that caused a borrower to receive a PPP loan amount that exceeds the borrower’s correct maximum loan amount under the CARES Act and the Economic Aid Act.”
Effect on Loan Forgiveness?
The procedural notice prohibits borrowers from receiving loan forgiveness for any amount that exceeds the correct maximum loan amount permitted by statute for that borrower, whether the excess loan amount was caused by borrower error or lender error.
Lenders that identify loan amount errors – in the process of reviewing a loan forgiveness application or after the lender has already submitted a forgiveness decision to SBA – must issue a decision to SBA denying forgiveness for the excess amount and/or promptly request withdrawal of the loan forgiveness decision.
Effect of Excess Loan Amount Error on SBA’s Loan Guarantee?
If due solely to the borrower’s error in completing the loan application form, the error does not invalidate SBA’s guarantee of the PPP loan. If due in whole or in part to the lender’s failure to satisfy its obligations under PPP rules and the document collection and retention requirements described in the lender application form, the SBA guarantee will not apply to the excess loan amount.
Effect on Borrower’s Obligations?
Excess loan amounts will not be granted loan forgiveness and will remain the obligation of the borrower to begin making payments on, in conjunction with any remaining unforgiven loan amount.
The full procedural notice can be found here.
