SBA Releases New Interim Final Rule on Review Procedures and Borrower and Lender Responsibilities for Paycheck Protection Program Loans – Duane Morris

On May 22, 2020, the Treasury Department and Small Business Administration (SBA) released a new interim final rule on the SBA’s process for reviewing Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The May 22 interim final rule sets forth procedures relevant to both PPP loan borrowers and lenders in the context of review and audits of PPP loans.

Note the following important items that, in some cases, differ from previously released information:

• The interim final rule does not distinguish between loans of $2 million or more and loans below $2 million for purposes of the SBA’s review rights. The prior guidance by the SBA that borrowers of PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith remains. However, there are other review areas, highlighted below, that apply to all borrowers, regardless of loan size.
• The SBA may undertake a review at any time in the SBA’s discretion―loans will not be limited to review only if a borrower applies for loan forgiveness.
• The SBA reiterated that the limitation of recourse against individual shareholders, members or partners of a PPP borrower for nonpayment of a PPP loan applies only if the borrower is eligible for a PPP loan in the first instance under the rules and guidance available at the time of the borrower’s loan application.

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