FED Announces Extension of Paycheck Protection Program
FED issued an interim final rule to expand the exception to apply for Paycheck Protection Program (PPP) loans made through August 08, 2020, which is the new date on which the PPP will now expire. FED is also providing a temporary change to allow banks to continue to make the Small Business Administration's (SBA) PPP loans to a broad range of small businesses in their communities. The extension will temporarily modify the rules of FED so that certain bank directors and shareholders can apply to their banks for PPP loans for their small businesses. The rule change will be effective on the date of publication in the Federal Register and will be in place while the PPP is active. Comments will be accepted for 45 days after publication in the Federal Register.
To prevent favoritism, FED limits the types and quantity of loans that bank directors, shareholders, officers, and businesses owned by these persons can receive from their affiliated banks. However, these limits have prevented some small business owners from accessing PPP loans—especially in rural areas. In April, the SBA had also clarified that PPP lenders can make PPP loans to businesses owned by their directors and certain shareholders, subject to certain limits, and without favoritism. The FED's rule change will allow these individuals to apply for PPP loans, consistent with the rules and restrictions of SBA. The change only applies to PPP loans. The SBA has explicitly prohibited banks from favoring, in processing time or prioritization, a PPP loan application from a director or equity holder and FED will administer its rule change accordingly.
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Comment Due Date: FR + 45 Days
Effective Date: FR Publication Date
Keywords: Americas, US, Banking, COVID-19, PPP, Paycheck Protection Program, SBA, Small Business Administration, Section 22(h), Credit Risk, CARES Act, FED
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