CLIENT ALERT: PPP Loan Updates on Disbursements and Seasonal Employers

Summary of the Interim Final Rule on Disbursements:

• A borrower cannot take draws on a Paycheck Protection Program (“PPP”) Loan and delay the start of the eight-week covered period.  The lender must make a one-time, full disbursement of the PPP loan within ten calendar days of loan approval; for the purposes of this rule, a loan is considered approved when the loan is assigned a loan number by SBA. 

• For loans that received an SBA loan number prior to the posting of this interim final rule but have not yet been fully disbursed, the following transition rules apply:
  • The ten calendar-day period described above begins on April 28, 2020
  • The eight-week covered period began on the date of first disbursement.

Notwithstanding this limitation, lenders are not responsible for delays in disbursement attributable to a borrower’s failure to timely provide required loan documentation, including a signed promissory note. Loans for which funds have not been disbursed because a borrower has not submitted required loan documentation within 20 calendar days of loan approval shall be cancelled by the lender, subject to the transition rules above. When disbursing loans, lenders must send any amount of loan proceeds designated for the refinance of an EIDL loan directly to SBA and not to the borrower. 

• Lenders will report on PPP loans and collect the processing fee on fully disbursed loans to which they are entitled. Lenders must electronically upload SBA Form 1502 information within 20 calendar days after a PPP loan is approved or, for loans approved before availability of the updated SBA Form 1502 reporting process, by May 18, 2020. The lender must report whether it has fully disbursed PPP loan proceeds.

Summary of the Interim Final Rule on Additional Criterion for Seasonal Employers:

• A seasonal employer may determine its maximum loan amount for purposes of the PPP by reference to the employer’ average total monthly payments for payroll “the 12-week period beginning February 15, 2019, or at the election of the eligible [borrower], March 1, 2019, and ending June 30, 2019.” A seasonal employer may alternatively elect to determine its maximum loan amount as the average total monthly payments for payroll during any consecutive 12-week period between May 1, 2019 and September 15, 2019.
•  A seasonal business that was dormant or not fully operating as of February 15, 2020 will be considered to have been in operation as of February 15, 2020, if the business was in operation for any 8-week period between May 1, 2019 and September 15, 2019. This approach aligns with guidance previously provided by the Small Business Administration concerning other seasonal businesses under section 1102. See Treasury, Paycheck Protection Program Loans: Frequently Asked Questions (FAQs), FAQ 9 (posted April 6, 2020) (https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses). 
• This only provides certain employers with an alternative means of calculating the maximum loan amount. All other terms and conditions in the PPP remain unchanged. All PPP applicants, borrowers, and lenders should continue to use existing SBA forms and follow all requirements set forth in the CARES Act and SBA regulations, except for the alternative approach described above for calculating the maximum loan amount.
• All lenders authorized to originate PPP loans may offer the terms under this interim final rule to eligible applicants and borrowers. PPP loans under this interim final rule are eligible for an SBA guarantee to the same extent as PPP loans based on existing PPP rules.

Interim Final Rule on Disbursements can be found here: https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Disbursements.pdf

Interim Final Rule on Additional Criterion for Seasonal Employers can be found here: https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Additional-Criterion-for-Seasonal-Employers.pdf

*The Attorneys at Levene Gouldin & Thompson, LLP are available to provide advice and counsel concerning these new statutory obligations and other matters related to COVID-19.