4. What do both borrowers and lenders need to know and do? a. What are the loan terms and conditions? b. Are there any fee waivers? c. Who pays the fee to an agent who assists a borrower?
PPP III. Temporary New Business Loan Program: Paycheck Protection Program
Effective Date: This rule is effective April 14, 2020.
4. What do both borrowers and lenders need to know and do?
a. What are the loan terms and conditions?
Loans will be guaranteed under the PPP under the same terms, conditions and processes as other 7(a) loans, with certain changes including but not limited to:
i. The guarantee percentage is 100 percent.
ii. No collateral will be required.
iii. No personal guarantees will be required.
iv. The interest rate will be 100 basis points or one percent.
v. All loans will be processed by all lenders under delegated authority and lenders will be permitted to rely on certifications of the borrower in order to determine eligibility of the borrower and the use of loan proceeds.
b. Are there any fee waivers?
i. There will be no up-front guarantee fee payable to SBA by the Borrower
ii. There will be no lender's annual service fee (&ldquoon-going guaranty fee&rdquo) payable to SBA
iii. There will be no subsidy recoupment fee and
iv. There will be no fee payable to SBA for any guarantee sold into the secondary market.
c. Who pays the fee to an agent who assists a borrower?
Agent fees will be paid by the lender out of the fees the lender receives from SBA. Agents may not collect fees from the borrower or be paid out of the PPP loan proceeds. The total amount that an agent may collect from the lender for assistance in preparing an application for a PPP loan (including referral to the lender) may not exceed:
i. One (1) percent for loans of not more than $350,000
ii. 0.50 percent for loans of more than $350,000 and less than $2 million and
iii. 0.25 percent for loans of at least $2 million.
The Act authorizes the Administrator to establish limits on agent fees. The Administrator, in consultation with the Secretary, determined that the agent fee limits set forth above are reasonable based upon the application req uirements and the fees that lenders receive for making PPP loans.
d. Can PPP loans be sold into the secondary market?
Yes. A PPP loan may be sold on the secondary market after the loan is fully disbursed. A PPP loan may be sold on the secondary market at a premium or a discount to par value. SBA will issue guidance regarding any advance purchase for loans sold in the secondary market.
e. Can SBA purchase some or all of the loan in advance?
Yes. A lender may request that the SBA purchase the expected forgiveness amount of a PPP loan or pool of PPP loans at the end of week seven of the covered period. The expected forgiveness amount is the amount of loan principal the lender reasonably expects the borrower to expend on payroll costs, covered mortgage interest, covered rent, and covered utility payments during the eight week period after loan disbursement. At least 75 percent of the expected forgiveness amount shall be for payroll costs, as provided in 2.o. To submit a PPP loan or pool of PPP loans for advance purchase, a lender shall submit a report requesting advance purchase with the expected forgiveness amount to the SBA. The report shall include: the Paycheck Protection Program Application Form (SBA Form 2483) and any supporting documentation submitted with such application the Paycheck Protection Program Lender's Application for 7(a) Loan Guaranty (SBA Form 2484) and any supporting documentation a detailed narrative explaining the assumptions used in determining the expected forgiveness amount, the basis for those assumptions, alternative assumptions considered, and why alternative assumptions were not used any information obtained from the borrower since the loan was disbursed that the lender used to determine the expected forgiveness amount, which should include the same documentation required to apply for loan forgiveness such as payroll tax filings, cancelled checks, and other payment documentation and any additional information the Administrator may require to determine whether the expected forgiveness amount is reasonable. The Administrator, in consultation with the Secretary, determined that seven weeks is the minimum period of time necessary for a lender to reasonably determine the expected forgiveness amount for a PPP loan or pool of PPP loans, since the PPP is a new program and the likelihood that many borrowers will be new clients of the lender. The expected forgiveness amount may not exceed the total amount of principal on the PPP loan or pool of loans. The Administrator will purchase the expected forgiveness amount of the PPP loan(s) within 15 days of the date on which the Administrator receives a complete report that demonstrates that the expected forgiveness amount is indeed reasonable.
Reference Resource: SBA-2020-0015-0001
Comment Date: Comments must be received on or before May 15, 2020.
To submit your comment on this topic here: SBA-2020-0015-0001
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