‘Main Street’ Program Opens for Lender Registration

Lenders may now register for the Federal Reserve’s Main Street Lender Program, the Boston Fed announced yesterday, adding that lenders “are encouraged to begin making Main Street program loans immediately.”
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Last week, the Fed announced several adjustments to the MSLP intended to facilitate participation by more small and midsize businesses. Responding to calls by ABA and others to increase small business access to the program, the Fed lowered the minimum loan size for certain loans from $500,000 to $250,000. The Fed also increased the maximum loan size for each loan option under the MSLP, increasing the term for each loan option from four years to five years and extending the repayment period for all loans by delaying principal payments for two years instead of one.
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In other MSLP news, the Fed yesterday requested comment on extending MSLP eligibility to nonprofit organizations. Loan terms under the proposed expansion would be the same as for MSLP loans to for-profit businesses. Under the Fed’s proposal, eligible 501(c)(3) and 501(c)(19) entities would have between 50 and 15,000 employees; meet financial thresholds based on operating performance, liquidity, and ability to repay debt; have been operational for at least five years; and hold endowments of no more than $3 billion. Comments are due by June 22.
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On Monday June 15, the U.S. Small Business Administration reopened the  Economic Injury Disaster Loan  (EIDL) and EIDL Advance program portal to all eligible applicants experiencing economic impacts due to COVID-19.
 
The SBA’s Economic Injury Disaster Loan and Loan Advance (EIDL) Program provides small businesses and non-profits with low-interest loans that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing due to COVID-19.
 
As a part of EIDL, you can access up to a $10,000 loan advance within three days of your application being accepted. This advance will act as a grant and does not need to be repaid. To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of the advance will be determined by the number of the small business’ pre-disaster (i.e., as of January 31, 2020) employees. The advance will provide $1,000 per employee up to a maximum of $10,000.
 
This advance may be used to:
·    Keep employees on payroll
·    Pay for sick leave
·    Meet increased production costs due to supply chain disruptions
·    Pay business obligations, including debts, rent and mortgage payments
 
Businesses and non-profits can apply now through  SBA’s online application portal . You must opt into the loan advance while completing loan application. You will fill out the streamlined advance application first when applying for EIDL. After submitting that application, you will then continue with the more detailed EIDL application.

A bipartisan group of senators on Friday wrote to Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranza calling for a more streamlined Paycheck Protection Program forgiveness application process for small firms. Specifically, they advocated for a one-page forgiveness application for any loan under $250,000.
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In a separate letter, a group of Senate Democrats urged several changes to the forgiveness process, including a streamlined forgiveness process for low-dollar loan amounts that would involve a simple attestation; a safe harbor for lenders to accept borrower certifications for these loans; online tools and resources to help small businesses and nonprofits navigate the forgiveness process; and a help line for borrowers to contact if they experience challenges.
 
House panel intensifies probe into banks' PPP lending

The House Select Subcommittee on the Coronavirus Crisis is probing whether some banks were involved in discriminatory practices by channeling Paycheck Protection Program loans to well-connected clients ahead of smaller firms and those in disadvantaged communities. The panel has also pressed the Treasury and the Small Business Administration to specify details of the funding paid out under the scheme. Learn more.
SBA Revises PPP Application Forms to Reflect Change in Applicant Eligibility

The Small Business Administration on Friday released new borrower and lender guaranty application forms for the Paycheck Protection Program to reflect expanded eligibility for applicants with prior felony convictions.
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Previously, businesses were ineligible for PPP loans if at least 20% of their equity was owned by someone who had been convicted of a felony in the past five years. Under an interim final rule issued Friday, this prohibition window is reduced to one year for businesses whose owners have been convicted of non-financial felonies. The five-year period remains in place for felonies involving fraud, bribery, embezzlement or false statements on applications for loans or federal assistance.
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SBA’s revised lender guaranty and borrower application forms reflect the changes in the interim final rule and should be used for new loan applications going forward.
 
Other points of note

  • Sen. Rounds’ letter that called for de minimis PPP forgiveness had 49 senators as cosigners on Friday when it was sent. All Democrats signed a similar letter the same day that was sent to treasury and SBA encouraging a de minimis amount. Similar efforts are going on in the House but we don’t know when or if there will be action on that.

  • PPP expires in 15 days. All leftover funds likely will go back to Treasury. If the program gets extended, we aren’t sure the appetite among banks will be as great as it has been for one reason: banks may not be eager to make 5 year loans at 1 percent interest. We expect few takers until the interest rate is raised; forgiveness factors are also an issue.

  • Sen. Kramer from ND and others in both houses are working on a $150k de minimis bill which is picking up steam, although all sorts of efforts at different amounts are underway.

  • If a de minimis bill proceeds, we would expect language to be added that requires the disclosure of identities of all borrowers. No one understands why the administration is pushing back against disclosure.

  • Sen. McConnell has told KY bankers that his number one priority is to have hold harmless language in any next bill. It is unclear if it would be retroactive or solely on a go-forward basis.

  • Evidently, there is a growing issue where non-bank lenders, particularly fintechs, got PPP loans for borrowers but won’t close them and release the funds. Simultaneously, those non-bank lenders reportedly won’t release borrowers from the loan agreements, effectively freezing out those would-be borrowers from the program. It is unknown why the money won’t be released.

  • Evidently there is a growing surge of state unemployment agencies discovering significant fraud in payments and efforts are starting to claw back that money. While laws vary between states, the Secret Service will handle those investigations where banks have filed SARs. While the secret service is communicating with banks to a degree, it is using the FinCEN system to do so. That system is closed and therefore limits how much information is available.
Colorado Bankers Association
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