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CARES Act – Client Alert – Disbursements

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CLIENT UPDATE: On April 28, 2020, Treasury issued a supplemental interim final rule regarding disbursements of Paycheck Protection Program loans.

In particular, the rule clarifies that a borrower cannot take multiple draws from a PPP loan so as to delay the start of the 8-week covered period for the loan. Thus, the lender must make a one-time full disbursement of the PPP loan.

This disbursement must be made within 10 calendar days of the loan being approved, with the approval date being when the loan is assigned a loan number by SBA. If the 10th calendar date is a weekend or legal holiday, the period continues to run until the end of the next business day.

For loans that received an SBA loan number before this rule was posted, but prior to full disbursement, the 10-day calendar period begins on April 28, 2020, and the 8-week covered period begins on the date of the first disbursement. 

The rule further provides that lenders are not responsible for delays in disbursement attributable to a borrower’s failure to timely provide required loan documentation. The rule also states that loans for which funds have not been disbursed shall be cancelled by the lender if the borrower has not submitted required loan documentation within 20 calendar days of the loan being approved. 

Additionally, the rule describes SBA Form 1502, through which PPP lenders will report on PPP loans and collect any processing fees to which they may be entitled. Note that, among other circumstances, a lender will not receive a processing fee if the PPP loan is cancelled or voluntarily terminated and repaid after disbursement, including if a borrower repays the PPP loan proceeds to conform to the borrower’s certification regarding the necessity of the PPP loan request. Further note that Form 1502, which the SBA will make available and will contain several reporting requirements, will need to be electronically uploaded by lenders within 20 calendar days after a PPP loan is approved (or by May 18, 2020 for loans approved before the availability of the updated SBA Form 1502).

The entire rule is available at: https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Disbursements.pdf.

Wadleigh’s COVID-19 Response Team will continue to monitor this situation closely and provide updates as the situation develops.