Treasury/SBA issue information on $349B available for business lending

CUNA 

The coronavirus disease (COVID-19) relief legislation signed into law last week recognizes credit unions as part of several vital economic recovery programs, notably the $349 billion Paycheck Protection Program (PPP). Through the program, the Small Business Administration (SBA) will make available funds for small businesses to secure up to eight weeks of payroll costs including benefits, as well as to pay interest on mortgages, rent and utilities.

CUNA continues to engage with the SBA and Treasury on strong specific guidance on the PPP.

“Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day,” said Treasury Secretary Steven Mnuchin. “The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”

All existing SBA-certified lenders will be given delegated authority to speedily process PPP loans. All federally insured depository institutions are eligible to participate, and according to the Treasury, “a broad set of additional lenders can begin making loans as soon as they are approved and enrolled in the program.

New lenders will need to submit their application to DelegatedAuthority@sba.gov to apply with the SBA.

Starting April 3, small businesses and sole proprietorships can apply. Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities, and due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll.

Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Loan forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease, according to the Treasury.

The Treasury has also created a one-page list of information for lenders, answering questions such as:

• Who is eligible to lend?
• Are the loan guaranteed by SBA?
• Are there guarantee fees?
• What underwriting is required?
• How will lenders be compensated?
• Who can be an agent?
• How will agents be compensated?
• Can these loans be sold on the secondary market?

The Treasury has also issued information for borrowers, as well as the application for borrowers.

CUNA staff attorneys, outside counsel and NCUA staff have analyzed credit unions’ eligibility as PPP borrowers, and agree that credit unions and other businesses “primarily engaged in the business of lending” are not eligible PPP borrowers. CUNA has joined other cooperatives in asking the SBA to allow cooperatives to participate in the program.

CUNA is working with SBA and NCUA to see if the SBA is willing to explore rule changes to make credit unions eligible for PPP through a change in SBA rules, as many credit unions could use access to these funds to provide economic relief and offset costs related to the pandemic.