Late Wednesday, January 13th, the SBA announced that banks with $1 billion in assets or less can start making Third Round PPP loans Friday, January 15th. Banks above that threshold will be able to start Tuesday, January 19th. CDFI institutions and minority-owned institutions started making loans the morning of Monday, January 11th.
Thankfully, compared to PPP Round One, and even PPP Round Two, much more information is available to lenders who want to participate in Round Three. It might not be perfect, but we are ahead of last year’s guidance.
Some of the PPP rules and systems stayed the same, while others changed. Highlights of some of the most important things to consider as banks begin to work through this new round of PPP lending are laid out below.
- Banks that made PPP loans last year will not need to re-register for this new PPP round. Any banks that did not participate last year must register using SBA form 3506.
- Here’s a big one. Every lender making Third Round PPP loans, including banks, must register on the government website SAM.gov. We are not exactly sure why Congress added this new requirement, but it probably was so they could say that they did something to reduce fraud. This website is generally used for entities receiving government grants and contracts, so some of the questions may not seem to fit. In any case, lenders making Third Round PPP loans must register on the site. Lenders must register on SAM.gov by 30 days after making their first PPP loan disbursement after December 27, 2020. Be warned that it does take some time to complete all the questions on this website.
- The Third Round of PPP lending is open to both first time PPP borrowers and to some qualifying borrowers that received PPP loans last year. Different rules and different applications for “First Draw” PPP borrowers and “Second Draw” PPP borrowers exist. Make sure your borrowers use the right application and that they know the rules for each one. For example, “Second Draw” applicants must prove that they had a 25% reduction in revenue to qualify. Also, qualifying “Second Draw” applicants that have NAICS codes that begin with a “72” can apply for 3.5 times monthly payroll rather than just 2.5 times monthly payroll.
- Once the bank receives an application, you must complete a “First Draw” or a “Second Draw” lender guaranty form, as applicable. Again, you must use the correct form because the information you must review and certify is different. There is a list of specific lender requirements found in the SBA guidance, and we encourage you to review that information.
- PPP borrowers must use 60% of their PPP loan proceeds for payroll purposes again this round. The program rules do allow some additional allowable expenses that can be included in the remaining 40%.
- There are a few new eligible entities that can now get PPP loans if they otherwise meet the qualifications. These include 501(c)(6) trade associations and chambers of commerce, housing cooperatives, destination marketing organizations and some non-profit news organizations.
- The SBA is not using the E-Tran System for this round of PPP lending. Instead, the SBA has created a new web-based lending platform. They have written a technical platform user guide to help lenders navigate the new system. Hopefully, this new system is ready to handle the demand. Alternatively, lenders may use a vendor’s Application Programming Interface, “API” to submit applications. The SBA has also issued technical guidance for lenders planning to use an API.
- The SBA has said that banks will not get an SBA loan number right away this round. In 2020, banks generally got their SBA loan number the same day they submitted the application. This round it could take several days to get the loan number, as the SBA will be doing some initial security checks on each borrower to help ensure the integrity of the PPP lending process.
- There will be a new, simple, one-page loan forgiveness form for loans of $150,000 or less.
Good luck to all of the Banks who are participating in this Third Round of PPP loans.