Interim Final Rule: Loan Review Procedures and Related Borrower and Lender Responsibilities
May 27, 2020
On Friday, May 22, 2020, the Small Business Administration (SBA) published an Interim Final Rule (IFR) relating to the Paycheck Protection Program (PPP). This rule summarizes key loan review provisions of the PPP and clarifies areas where The Coronavirus Aid, Relief, and Economic Security Act (CARES) was either unclear or in the eyes of the SBA needed to treat certain items with more clarity or specificity. A link to this ruling may be found here: https://home.treasury.gov/system/files/136/PPP-IFR-SBA-Loan-Review-Procedures-and-Related-Borrower-and-Lender-Responsibilities.pdf
Key Provisions or Clarifications in the Interim Final Ruling
Below we will focus only on those items we deem new, clarified, or significant for our clients and in no way does the below purport to be an exhaustive list.
Identification of Loans Subject to Review by SBA
The SBA will review selected PPP loans. This ruling clarifies that all PPP loans are subject to review based on what is deemed appropriate. These reviews will happen at the SBA’s discretion and the rule reiterates the six year file retention guidelines that were highlighted in the Loan Application for Forgiveness, SBA Form 3508.
If during such a review a borrower is determined to be ineligible, none of the loan proceeds will be forgiven. Appeal procedures will be available, and a later interim final rule is expected on this topic.
Lender Loan Forgiveness Process and Notification Deadlines
Lenders must confirm receipt of borrower certifications from the SBA Form 3508, confirm receipt of documentation borrowers must submit to aid in verifying payroll and nonpayroll costs and confirm the borrower’s calculations. Lenders should work with borrowers to remedy any issues that arise.
Lenders have 60 days from the time of submission of a borrower’s application for loan forgiveness to make a determination on forgiveness. Once a determination is made a borrower that disputes the decision has 30 days from notice to request that the SBA conduct a review. If a loan file is selected for review, the SBA will notify the lender who then has five business days to provide documents requested to the SBA and notify the borrower.
Lastly, lender fees will be subject to clawback if the lender or any of its loans are determined to be ineligible.
Our Management Consulting team is willing and eager to assist you by advising on documentation best practices, modifying your chart of accounts and calculating initial projections. Our Management Consulting Team can be reached using the following email: consulting@kha.cpa. As you are planning over this critical eight-week period, we strongly encourage you to request our assistance. These calculations for potential loan forgiveness amounts are complex and items will be worked on a first come first served basis, upon receipt of an executed engagement letter and requested items.
As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress or other authorities as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.
These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This by no means is a recommendation to obtain a loan or attempt to apply for a loan. There are many unknowns at this time regarding what other stimulus (grants or other loan options) that may become available with pending and future bills, executive orders, or emergency declarations to follow, that may become laws. Consult your legal and business advisors prior to making financing decisions. This is intended for illustrative and discussion purposes only.