November 28, 2021

Volume XI, Number 332

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SBA Releases Additional Guidance on Calculating Maximum Loan Amounts and Set of Procedural Notices

This 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.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume XI, Number 21
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About this Author

Phil Feigen of the Polsinelli Law Firm Corporate Transaction Attorney, in Washington DC
Office Managing Partner

Phil Feigen brings a unique perspective to providing general corporate advice, as well as complex business counsel to clients in ever-changing regulatory environments.  For more than 20 years, Phil has been providing guidance with respect to Small Business Investment Companies and other Small Business Administrative regulations, federal and state banking laws and federal securities laws. 

Phil focuses on helping clients through the SBIC licensing process so that they may realize the benefits of the program and increase the amount of investment...

202-626-8330
Sara C. Ainsworth Securities & Corporate Finance Attorney Polsinelli Washington, D.C.
Associate

As an associate in the Securities & Corporate Finance practice, clients rely on Sara Ainsworth to work with Polsinelli’s team of attorneys to analyze each transaction matter to develop a strategic approach to representation based on the client’s immediate and long-term business and operational goals.

Working closely with seasoned Polsinelli attorneys in the Securities & Corporate Finance practice, Sara helps deliver a range of legal services during the life cycle of the client’s business—from selecting the appropriate choice of entity through to exit strategy.  Her practice...

202.772.8495
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