Loans to Directors Under the SBA Paycheck Protection Program


We wanted to make you aware that under the Interim Final Rule issued by the SBA yesterday, businesses that are not eligible for Payroll Protection Program (“PPP”) loan guaranties are identified in 13 C.F.R. 120.110 and SOP50 10. Under those guidelines, businesses of which a Lender or any of its Associates owns a financial or equity interest are not eligible for a loan guaranty under Section 7(a). An Associate is defined in 13 C.F.R. 120.10 as a Lender’s officer, director, key employee, or holder of 20% or more of a business’ stock.

As a result, we do not believe a loan made to a business of which a Lender’s officers, directors, key employees or holders of 20% or more of the business’ stock are involved qualifies for the 100% guaranty of the PPP until and unless the SBA amends its relevant regulations.

Additionally, since the forgiveness for PPP loans authorized under §1106 of the CARES Act is limited to “covered loans,” which are loans guaranteed under the PPP of Section 7(a), it is likely that any such loan would not qualify for forgiveness either.


© 2024 Jones Walker LLP
National Law Review, Volumess X, Number 94