Best Practices: SBA Responses to PPP FAQs

The SBA recently responded and provided guidance on its Paycheck Protection Program Platform site to several of the frequently asked questions that Lenders have related to SBA PPP loans.  While we recommend reading the entire Q & A at: (SBA_PPP_Platform_Update.pdf (ymaws.com)), below is a summary of the responses to the questions that Starfield & Smith has received the most  often from Lenders:

• Should Lenders Offset Available Funds from Defaulted Borrowers?

Summary of SBA Response: If a PPP borrower is unable to seek forgiveness, is asked to pay back the loan, and then defaults, the Lender should make every attempt to collect available funds to reduce the loan balance. If the Lender has the right of offset, it should exercise that right as well.  The SBA expects Lenders to protect the SBA’s position as best as possible and recover any funds they can to minimize any losses.

• How Should Lenders Notify SBA that a Borrower wants to Request a Manual Review of a Partial Forgiveness Decision?

Summary of SBA Response: On January 27, 2022, the SBA issued Procedural Notice 5000-827666 which addresses scenarios in which a Borrower may ask the SBA to conduct a manual review when its loan is only partially forgiven but has not been reviewed by the SBA. The PPP platform to accept these requests is still under construction, so while no requests can currently be accepted by the SBA, the Lender should notify Borrowers of their rights under this notice and continue to collect the requests until the platform module is operational.  So long as the lender received the request from the Borrower within 30 days from its receipt of the notice of partial forgiveness decision, SBA will accept the request for manual review when the Platform module is complete.  The SBA will issue a notification when the Platform module is operational.

• Can Lenders Extend the Maturity on PPP Loans Beyond 5 Years?

Summary of SBA Response:  Lenders are encouraged to work with borrowers to allow for maximum flexibility in repayment of any outstanding balance of a PPP loan. Lenders should consult SOP 50 57 2, 7(a) Loan Servicing and Liquidation to make sure they comply with all program requirements.

Pursuant to the SOP, the maturity date of a PPP loan may be extended for up to 10 years beyond its original maturity date if the extension is granted before the SBA loan guaranty expires (i.e., less than 180 calendar days after the original maturity date) and the extension will help in the “orderly repayment of the loan.”

The mission of the SBA is to promote the success of small businesses, and, in furtherance thereof, SBA encourage Lenders to work with Borrowers to assist them in repaying all SBA loans, including PPP loans.  Therefore, if an extension of the maturity of a PPP loan will reasonably increase the likelihood that the Borrower will repay the balance of a PPP loan in full, SBA encourages Lenders to provide this option where it is reasonable to do so.

Additionally, SBA is currently working to develop a process to allow a forgiveness request to be entered into the PPP Platform after guaranty purchase has occurred. Once SBA reviews and concurs with the forgiveness requests, SBA will then convert the guaranty purchase to a forgiveness decision. It is important to note that the Lender is still responsible for processing the forgiveness decision even after SBA has honored the guaranty.

These questions are representative of the questions being posed to our attorneys most frequently.  While the list of questions is not exhaustive, it illustrates the SBA’s approach to how it expects Lenders to service their PPP loan portfolios.

For more information on PPP related servicing issues, contact Tim at tdlauro@starfieldsmith.com or 267-470-1223.