Business Lending

PPP Lender Requirements

Update: The PPP Lender Application is HERE

The elusive application to apply for PPP lender-approved status is expected to become available sometime on Friday. In the meantime, the SBA has published the requirements that a financing provider will have to meet to be eligible for approval. Federally insured depository institutions are already approved so these bullet points apply mainly to non-bank financing providers and online lenders.

• Must already originate, maintain, and service business loans or other commercial financial receivables and participation interests
• Have already been in compliance with the Bank Secrecy Act since at least February 25, 2019
• Have already originated, maintained, and serviced more than $50 million worth of business loans or other commercial financial receivables during a consecutive 12 month period in the past 36 months, or is a service provider to any insured depository institution that has a contract to support such institution’s lending activities in accordance with 12 U.S.C. Section 1867(c) and is in good standing with the appropriate Federal banking agency.

Loan underwriting requirements

• Confirm receipt of borrower certifications contained in Paycheck Protection Program Application form issued by the Administration;
• Confirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020;
• Confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application; and
• Follow applicable Bank Secrecy Act requirements

Notes from the SBA:
Entities that are not presently subject to the requirements of the Bank Secrecy Act, should, prior to engaging in PPP lending activities, including making PPP loans to either new or existing customers who are eligible borrowers under the PPP, establish an anti-money laundering (AML) compliance program equivalent to that of a comparable federally regulated institution. Depending upon the comparable federally regulated institution, such a program may include a customer identification program (CIP), which includes identifying and verifying their PPP borrowers’ identities (including e.g., date of birth, address, and taxpayer identification number), and, if that PPP borrower is a company, following any applicable beneficial ownership information collection requirements. Alternatively, if available, entities may rely on the CIP of a federally insured depository institution or federally insured credit union with an established CIP as part of its AML program. In either instance, entities should also understand the nature and purpose of their PPP customer relationships to develop customer risk profiles. Such entities will also generally have to identify and report certain suspicious activity to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). If such entities have questions with regard to meeting these requirements, they should contact the FinCEN Regulatory Support Section at FRC@fincen.gov. In addition, FinCEN has created a COVID-19-specific contact channel, via a specific drop-down category, for entities to communicate to FinCEN COVID-19-related concerns while adhering to their BSA obligations. Entities that wish to communicate such COVID-19-related concerns to FinCEN should go to www.FinCEN.gov, click on “Need Assistance,” and select “COVID19” in the subject drop-down list.

Each lender’s underwriting obligation under the PPP is limited to the items above and reviewing the “Paycheck Protection Application Form.” Borrowers must submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs. The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower. The Administrator, in consultation with the Secretary, has determined that lender reliance on a borrower’s required documents and attestation is necessary and appropriate in light of section 1106(h) of the Act, which prohibits the Administrator from taking an enforcement action or imposing penalties if the lender has received a borrower attestation.

Lenders will need to complete this form with each loan.
Borrowers must complete this form.

The full guidelines can be found here

How to Become a PPP Approved Lender With the SBA

Update 4/8/20: The PPP Lender Application for Non-banks/fintech Companies is HERE
Update 4/3/20: The PPP Lender Application for Banks is HERE

The Treasury Department has set an April 3rd expected start time for lenders to begin accepting Payroll Protection Program loan applications. But who exactly can make the loans? Are fintech lenders in or out?

According to the Treasury, the following are already approved:

• All existing SBA-certified lenders
• All federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions

BUT! A broad set of additional lenders can begin making loans as soon as they are approved and enrolled in the program. This “broad set,” that presumably includes fintech lenders, can apply by emailing an application to DelegatedAuthority@sba.gov.

While the loans are 100% backed by the full faith and credit of the United States. Lenders will be compensated in accordance with the following structure, a percentage of the financing outstanding balance at the time of final disbursement:

• Loans $350,000 and under: 5.00%
• Loans greater than $350,000 to $2 million: 3.00%
• Loans greater than $2 million: 1.00%

Lenders may not collect any fees from the applicant.

Who can be an agent/broker?

• An attorney;
• An accountant;
• A consultant;
• Someone who prepares an applicant’s application for financial assistance and is employed and compensated by the applicant;
• Someone who assists a lender with originating, disbursing, servicing, liquidating, or litigating SBA loans;
• A loan broker; or
• Any other individual or entity representing an applicant by conducting business with the SBA

Agent fees will be paid out of lender fees. The lender will pay the agent. Agents may not collect any fees from the applicant. The fee structure is below:

• Loans $350,000 and under: 1.00%
• Loans greater than $350,000 to $2 million: 0.50%
• Loans greater than $2 million: 0.25%