On April 28, 2020, the U.S. Small Business Administration (“SBA”) posted a sixth Interim Final Rule on Disbursements. This Interim Final Rule supplements previous regulations and guidance on several important, discrete issues related to the Paycheck Protection Program (“PPP”). The immediate effective date of this Interim Final Rule will benefit lenders so that they can swiftly close and disburse loans to small businesses. Our summary will focus on sections of this Interim Final Rule which supplement previous guidance for borrowers and lenders:
Section 1a. indicates that a borrower cannot take multiple draws from a PPP loan to delay the start of the 8-week covered period. The lender must make a one-time, full disbursement of the PPP loan within 10-calendar days of loan approval (when the loan is assigned a loan number by SBA). For any loans with partial disbursements prior to the posting of this Interim Final Rule, the 10-calendar day period described above will be considered to have begun on April 28, 2020, and the 8-week covered period began on the date of the first disbursement.
Lenders are not responsible for delays in disbursement attributable to a borrower’s failure to provide required loan documentation, including a signed promissory note. Loans for which funds have not been disbursed because a borrower has not submitted required loan documentation within 20 calendar days of loan approval shall be cancelled by the lender.
Additionally, when disbursing loans, lenders must send any amount of loan proceeds designated for the refinance of an Economic Injury Disaster Loan (“EIDL”) directly to SBA and not to the borrower.
This new guidance should resolve any questions borrowers may have had about the timing of the PPP loan disbursement, and whether they can delay the disbursement, and subsequently the start of the 8-week covered period, especially in cases where the business may be closed due to government order and employees cannot return to work until a future date.
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For additional information on the Paycheck Protection Program, as well as other Federal, state and local relief measures, please visit our COVID-19 Resource Center on our website. If you have any questions, please contact your Tronconi Segarra & Associates advisor or a member of our response team at covid19team@tsacpa.com
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