As the environment in response to Covid-19 continues to be challenging, the California Community Banking Network (CCBN) is asking for relief and clarity from policymakers in order for community banks to focus on their customers and communities and further the overarching goal of reviving the country.
CCBN applauds the recent executive order signed by President Trump directing agencies to use all emergency authorities to swiftly rescind or temporarily waive restrictive regulations and is hopeful more can be done to help ease burdens on community banks and small businesses.
CCBN also supports the Independent Community Bankers of America’s (ICBA) recent letter to Congress urging inclusions to the next legislative package, which include recommendations addressing the Paycheck Protection Program (PPP).
SBA data shows the tremendous role community banks have played, funding more than half of the loans in the first PPP round. Community banks have been working tirelessly to fund and ensure the survival of small businesses throughout the country and continue to navigate through the PPP.
Current PPP guidance and criteria remain unclear and as community banks service these loans it is crucial that relief from any red tape is lifted to allow community banks to provide essential funding to keep small businesses alive. More specifically relaxing the PPP criteria and simplifying the forgiveness documentation will greatly alleviate the daunting challenges of this already obscure process.
As community banks continue to track, report and fund these loans, more reprieve and guidance is necessary. Community banks are seeking the reasonable discretion and prudence of regulatory agencies as they support small businesses and aid in economic recovery.
The Small Business Administration issued an interim final rule extending the repayment date for the Paycheck Protection Program certification safe harbor. Under the revised policy, any borrower that applied for a PPP loan prior to April 24 and repaid the loan in full by May 18 will be deemed by SBA to have made the required certification in good faith. The deadline was previously May 14.
The rule also codifies the deadline extension for submitting the initial SBA Form 1502, for which the agency has yet to provide detailed guidance. As the SBA announced in the latest update to its PPP frequently asked questions, that deadline is now the later of: (1) May 29, 2020, or (2) 10 calendar days after disbursement or cancellation of the PPP loan.
Lenders are required to submit the form to report on PPP loans and collect the processing fees on fully disbursed loans to which they are entitled, though SBA 7(a) Fiscal and Transfer Agent Colson Services Corp. says in an online advisory that lenders should not report their PPP loans on Form 1502 until the SBA has released additional guidance.
Additional PPP guidance and resources are available on Treasury’s PPP webpage and ICBA's COVID-19 resource center.
The Small Business Administration's guidance on authorized uses of Paycheck Protection Program loans does not align with the CARES Act, the agency's inspector general reported.
The IG report notes that while the law does not set any restrictions on the portion of loans that must be used for payroll, an SBA interim final rule sets a 75 percent threshold.
The report also notes that the SBA's maturity term of two years undershoots the law's maximum term of up to 10 years, which could result in an unintended burden to PPP borrowers.
Read the report
ICBA called on the Treasury Department and Small Business Administration to provide additional guidance on the process for obtaining forgiveness of Paycheck Protection Program loans.
In a letter, ICBA urged the agencies to:
SBA and Treasury value all lenders and their small business customers.
To ensure access to the PPP loan program for the smallest lenders and their small business customers, starting at 4 p.m. today EDT through 11:59 p.m. EDT, SBA systems will only accept loans from lending institutions with asset sizes less than $1 billion dollars.
Please note, lending institutions with asset sizes less than $1 billion will still be able to submit PPP loans outside of this time frame. Please also note that lenders with asset sizes greater than $1 billion will be able to submit loans outside of today’s 4pm -11:59pm EDT reserved processing time.
This reserved processing time applies today April 29, 2020. SBA and Treasury will evaluate whether to create a similar reserved time again in the future.
SBA and Treasury continue to monitor loan system performance and will continue to provide frequent updates to the lending community.
SBA and Treasury value all lenders and their small business customers.
For the benefit of small business customers and their employees, SBA and Treasury are working on ways to optimize the loan processing system.
Starting today, Robotic Processing Automation (RPA), which are robotic systems used by some banks to mimic human data entry, may not be used to submit Paycheck Protection Program loans into SBA’s E-Tran loan system.
RPAs burden the processing system and diminish its capabilities. Without RPAs, the loan processing system will be more reliable, accessible, and equitable for all small businesses.
Application Programing Interface (APIs) will still be permitted. If you are a lender who needs assistance converting your submission process to a non-RPA API, contact Sheri McConville. (Sheri.Mcconville@sba.gov)
SBA and Treasury have updated the guidance for lenders who have received a significant amount of Paycheck Protection Program (PPP) loan applications.
The minimum amount of lender-approved and SBA-ready PPP loans that a lender must have ready for the XML file submission process is now 5,000 loans.
Please note these XML files of 5,000 or more approved PPP loans must be submitted to SBA by 9pm EDT on Monday, April 27, 2020.
SBA and Treasury value all lenders and their small business customers and will continue to provide updates to the PPP lending community as loan processing resumes this week.
From a CCBN bank:
Forgiveness is discussed in the following sections on the PPP – IFRN FINAL:
a.) Section O starting Page 13
Forgiveness is discussed in the following sections on the PPP – IFRN FINAL (Addtl) – for self-employed and independent contractors:
a.) Section F starting Page 11
The clause that has merited attention on our side is the following from the PPP –IFRN FINAL on Page 13-14:
That is, the borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds for forgivable purposes described below and employee and compensation levels are maintained.
Our interpretation is that the number of employees can’t be reduced and no reduction in their compensation at the time of funding thru the 8 week period. They could hire more or give raises if they chose. Hence the borrower need for a current employee list/with salaries to track against.
FinTech companies that were used by banks to help get loans into the system but who failed to do so before the system shutdown due to number of loans that overwhelmed their ability to process.
Below is guidance from ICBAs FAQ’s on agents
The obligation of a lender to pay the appropriate agent fee does not commence unless the bank has agreed that the accounting firm/CPA is acting as an agent for the bank. Please see guidance provided below from the American Institute of Public Accountants (AICPA) to their members in support of best industry practices.
“The law is clear that agents cannot collect a fee from an applicant but must instead collect a fee from the lender. If you choose to be an agent, we suggest you (the Accounting Firm) contact the lender before embarking on the engagement and get a written agreement with them so you get paid. You should have a conflict waiver in the agreement with the lender, just like in your loan assistance engagement letter with the client. Disclose this arrangement with your client as well.”
We are still awaiting SBA guidance
The forgiveness of a PPP loan is not taxable to the borrower unlike the usual treatment of debt forgiveness.
OriTrust's PPP Fast Application is a powerful bank developed tool that can help its members fast-track PPP lending and is very straightforward and simple to use. It helps with making sure the bank is collecting all the required information and with the ongoing monitoring of information to ensure each borrower obtains loan forgiveness.