April 20, 2020

Senators Urge SBA To Allow E-Tran Submissions For PPP Loans During Funding Lapse

As lawmakers continue working to finalize additional funding for the Small Business Administration’s Paycheck Protection Program, a group of eight Republican senators wrote to SBA Administrator Jovita Carranza urging SBA to allow loan applications completed as of April 16, when the initial round of funding ran out, to be entered into the E-Tran system. Once program funds were exhausted, SBA announced that it would no longer accept PPP loan applications.

“By providing access to the E-Tran system, lenders will be allowed to submit the backlog of applications they have already received,” the senators wrote. “It will also protect businesses that previously applied from being leap-frogged by new applicants should the program reopen.”

The lawmakers also urged SBA to continue building up its online platforms and technical capacity to meet the unprecedented demand from borrowers.
 “We are concerned that the E-Tran system will be overwhelmed, if the SBA does not allow submissions before the program reopens,” they added. “Keeping the system operational will mitigate the influx once the program receives more funding.”

Nichols: Delaying More PPP Funds Risks ‘Irreparable’ Harm To Small Biz

In a letter to congressional leaders, the American Bankers Association called for Congress to move “expeditiously” to authorize more funding for the PPP. Banks worked through numerous challenges to deliver the original funds to small businesses in less than 14 days, ABA President and CEO Rob Nichols wrote, but “regrettably, the delay in congressional action is harming these businesses — perhaps irreparably.”
“Fear of being left behind has also raised demand for PPP loans to a fever pitch, yet because the SBA has shut down access to the portal pending new funding, our member banks are unable to process applications so they can be ready if and when Congress allows SBA to switch the program back on,” Nichols added. “Further delay will only harm the very businesses that the program is meant to protect.”

Fed Officials Provide Additional Clarity On Paycheck Protection Program Liquidity Facility

With the Federal Reserve’s Paycheck Protection Program Liquidity Facility now up and running, officials from the Fed shared additional details on the program and answered questions during a teleconference with American Bankers Association banker leadership. The PPPLF offers nonrecourse loans to institutions eligible to make PPP loans, with the SBA-guaranteed loans pledged as collateral to the Federal Reserve Banks.

One question addressed the borrower certification, required for any Section 13(3) facility, that the participating bank is not insolvent and that it cannot obtain adequate credit accommodation from other sources. Fed officials clarified that this requirement is “not meant to prevent usage of this facility” and that banks “can rely on the fact that the Federal Reserve established this facility as an indication that, without using it, you would not have adequate credit accommodation.”
In addition to receiving advances through the PPPLF, banks can choose to pledge PPP loans to the discount window, Fed officials noted, highlighting several distinctions between the two. For example, advances made under the PPPLF have a fixed interest rate of 35 basis points, with the extension of credit matching the life of the underlying loan, while discount window advances made under the primary credit program have a variable interest rate — currently set at 25 basis points — and credit is extended for 90 days. They added that PPP loans pledged to the PPPLF may be excluded from leverage ratio calculations, as codified by an interim final rule issued by the federal banking agencies earlier this month. Finally, Fed staffers said that they plan to refine and update PPPLF FAQs as new questions arise from participating depository institutions. Questions on the PPPLF may be submitted to ppplf@chi.frb.org.

ABA Offers Feedback On Fed’s Main Street Lending Program

As the Federal Reserve prepares to launch its $600 billion Main Street Lending Program to meet the credit needs of small and midsize businesses amid the coronavirus emergency, the American Bankers Association offered the Fed nine suggestions to help the program work most effectively. Specifically, ABA recommended that the Fed:
  • publicly affirm banks’ role as underwriters in the program (in contrast with the PPP)
  • provide flexibility for banks to choose reference rates other than SOFR
  • allow a range of loan tenors beyond the fixed four-year maturity currently contemplated
  • reduce the minimum MSLP loan size from $1 million to $50,000 to allow community banks to serve more small business customers
  • provide greater flexibility on the maximum loan size by pegging it to net operating income instead of an EBITDA-based measure
  • permit greater flexibility in the required attestations
  • clarify how regulators will treat MSLP loans to avoid ex-post criticism
  • expand MSLP lender eligibility to include U.S. branches and agencies of foreign banking organizations
  • ensure that MSLP participation does not inadvertently move banks into different tailored supervisory categories

Fed's Temporary Rule Change Facilitates PPP Loans To Bank Directors, Shareholders

Following clarification from the Small Business Administration and Treasury Department that bank directors and shareholders may receive Paycheck Protection Program loans from their related banks, the Federal Reserve said that it would provide a temporary exemption from Regulation O for these loans. Reg O generally limits lending activity to bank directors, shareholders, officers and businesses owned by these persons.
 The exception, which applies only to PPP loans, takes effect immediately. The Fed added that any PPP loans extended to bank directors and shareholders must conform to SBA’s recent guidance, which states that the eligible business must follow the same process as any similarly situated customer or account holder and must not receive favoritism from the bank.

SBA: PPP Loan Sales Retain Guaranty, Do Not Require SBA Approval

Sales of Paycheck Protection Program loans into the secondary market do not require Small Business Administration approval, the agency and the Treasury Department said in an update to their frequently asked questions. A PPP loan sold into the secondary market retains the 100% SBA guaranty, the FAQ clarified.
The FAQ also reiterated guidance in the agency’s April 2 interim final rule that a PPP loan may be sold into the secondary market at any time after it is fully disbursed and that it may be sold at a premium or at a discount to par value.

EEOC Issues New Q&As On Employees Returning To Work

As businesses begin preparing for the eventual re-opening of their workplaces, the Equal Employment Opportunity Commission updated its list of coronavirus-related questions and answers to include a section on returning to work. The new Q&As clarify that as government stay-at-home orders and other restrictions are modified or lifted in an employer’s area, employers may implement any employee screening that is consistent with advice from the Centers for Disease Control and Prevention and public health authorities for their workplace.
 The new FAQs also clarify that an employer may require returning employees to wear protective gear (for example, masks and gloves) and observe infection control practices (for example, regular hand-washing and social distancing protocols). The EEOC noted that where an employee with a disability needs a related reasonable accommodation under the Americans with Disabilities Act or a religious accommodation under Title VII of the Civil Rights Act, the employer should discuss the request and provide the modification or an alternative if feasible and not an undue hardship on the operation of the employer's business under the ADA or Title VII.

How Can MBA Help Protect Your Employees and Customers?

Banks have never stopped working during this crisis. However, as our country considers how to go “back to work,” we know you have questions about how to best proceed for your employees and customers. What do you need to know as you prepare to resume normal operations? Send your questions to MBA, and we will do our best to provide resources to assist you.

ABA Foundation Webinar Focuses On Protecting Seniors From COVID-19 Scams

With fraud scams related to the coronavirus on the rise, and with older Americans particularly vulnerable to financial exploitation, the American Bankers Association Foundation will host a free webinar at 2 p.m. Tuesday, April 21, to discuss the latest trends and review resources available to help protect seniors. The webinar will feature speakers from the Consumer Financial Protection Bureau and the Federal Trade Commission. 

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