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Paycheck Protection Program (PPP) – What do Borrowers and Lenders Need to Know?

What are the Paycheck Protection Program (PPP) loan terms and conditions?

Loans will be guaranteed under the Paycheck Protection Program (PPP) under the same terms, conditions, and processes as other 7(a) loans, with certain changes including, but not limited to:

  • The guarantee percentage is 100 percent.
  • No collateral will be required.
  • No personal guarantees will be required.
  • The interest rate will be 100 basis points or one percent.
  • 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.

Are there any fee waivers for the Paycheck Protection Program (PPP) loan?

  • There will be no up-front guarantee fee payable to the SBA by the Borrower;
  • There will be no lender’s annual service fee (“on-going guaranty fee”) payable to SBA;
  • There will be no subsidy recoupment fee; and
  • There will be no fee payable to the SBA for any guarantee sold into the secondary market.

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 the 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:

  • One (1) percent for loans of not more than $350,000;
  • 0.50 percent for loans of more than $350,000 and less than $2 million; and
  • 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 requirements and the fees that lenders receive for making PPP loans.

Can Paycheck Protection Program (PPP) loans be sold into the secondary market?

Yes. A Paycheck Protection Program (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. The SBA will issue guidance regarding any advance purchase for loans sold in the secondary market.

Can the SBA purchase some or all of the Paycheck Protection Program (PPP) 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 the 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 the 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
  • 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.

Other Paycheck Protection Program (PPP) Resources

For more information on the Paycheck Protection Program (PPP) loan details, click here.

For more information on payroll costs, click here.

For a top line overview of the program, click here.

If you’re a borrower, more information can be found here.

The application for borrowers can be found here.

If the Payroll Protection Program (PPP) isn’t something you can take advantage of, check out the SBA Economic Injury Disaster Loan (EIDL) here.

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