[Federal Register Volume 85, Number 86 (Monday, May 4, 2020)]
[Rules and Regulations]
[Pages 26321-26324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09398]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket Number SBA-2020-0022]
RIN 3245-AH38


Business Loan Program Temporary Changes; Paycheck Protection 
Program--Requirements--Disbursements

AGENCY: U. S. Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) 
posted an interim final rule (the First PPP Interim Final Rule) 
announcing the implementation of the Coronavirus Aid, Relief, and 
Economic Security Act (CARES Act or the Act). The Act

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temporarily adds a new program, titled the ``Paycheck Protection 
Program,'' to the SBA's 7(a) Loan Program. The Act also provides for 
forgiveness of up to the full principal amount of qualifying loans 
guaranteed under the Paycheck Protection Program (PPP). The PPP is 
intended to provide economic relief to small businesses nationwide 
adversely impacted by the Coronavirus Disease 2019 (COVID-19). SBA 
posted additional interim final rules on April 3, 2020, April 14, 2020, 
and April 24, 2020. This interim final rule supplements the previously 
posted interim final rules with additional guidance. This interim final 
rule supplements SBA's implementation of the Act and requests public 
comment.

DATES: 
    Effective date: This rule is effective May 4, 2020.
    Applicability date: This interim final rule applies to applications 
submitted under the Paycheck Protection Program through June 30, 2020, 
or until funds made available for this purpose are exhausted.
    Comment date: Comments must be received on or before June 3, 2020.

ADDRESSES: You may submit comments, identified by number SBA-2020-0022, 
through the Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. SBA will post all 
comments on www.regulations.gov. If you wish to submit confidential 
business information (CBI) as defined in the User Notice at 
www.regulations.gov, please send an email to [email protected]. Highlight 
the information that you consider to be CBI and explain why you believe 
SBA should hold this information as confidential. SBA will review the 
information and make the final determination whether it will publish 
the information.

FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833-
572-0502, or the local SBA Field Office; the list of offices can be 
found at https://www.sba.gov/tools/local-assistance/districtoffices.

SUPPLEMENTARY INFORMATION:

I. Background Information

    On March 13, 2020, President Trump declared the ongoing Coronavirus 
Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude 
to warrant an emergency declaration for all States, territories, and 
the District of Columbia. With the COVID-19 emergency, many small 
businesses nationwide are experiencing economic hardship as a direct 
result of the Federal, State, tribal, and local public health measures 
that are being taken to minimize the public's exposure to the virus. 
These measures, some of which are government-mandated, are being 
implemented nationwide and include the closures of restaurants, bars, 
and gyms. In addition, based on the advice of public health officials, 
other measures, such as keeping a safe distance from others or even 
stay-at-home orders, are being implemented, resulting in a dramatic 
decrease in economic activity as the public avoids malls, retail 
stores, and other businesses.
    On March 27, 2020, the President signed the Coronavirus Aid, 
Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 
116-136) to provide emergency assistance and health care response for 
individuals, families, and businesses affected by the coronavirus 
pandemic. The Small Business Administration (SBA) received funding and 
authority through the Act to modify existing loan programs and 
establish a new loan program to assist small businesses nationwide 
adversely impacted by the COVID-19 emergency. Section 1102 of the Act 
temporarily permits SBA to guarantee 100 percent of 7(a) loans under a 
new program titled the ``Paycheck Protection Program.'' Section 1106 of 
the Act provides for forgiveness of up to the full principal amount of 
qualifying loans guaranteed under the Paycheck Protection Program. On 
April 24, 2020, the President signed the Paycheck Protection Program 
and Health Care Enhancement Act (Pub. L. 116-139), which provided 
additional funding and authority for the Paycheck Protection Program.

II. Comments and Immediate Effective Date

    The intent of the Act is that SBA provide relief to America's small 
businesses expeditiously. This intent, along with the dramatic decrease 
in economic activity nationwide, provides good cause for SBA to 
dispense with the 30-day delayed effective date provided in the 
Administrative Procedure Act. Specifically, it is critical to meet 
lenders' and borrowers' need for clarity concerning program 
requirements as rapidly as possible because the last day eligible 
borrowers can apply for and receive a loan is June 30, 2020.
    This interim final rule supplements previous regulations and 
guidance on several important, discrete issues. The immediate effective 
date of this interim final rule will benefit lenders so that they can 
swiftly close and disburse loans to small businesses. This interim 
final rule is effective without advance notice and public comment 
because section 1114 of the Act authorizes SBA to issue regulations to 
implement Title I of the Act without regard to notice requirements. 
This rule is being issued to allow for immediate implementation of this 
program. Although this interim final rule is effective immediately, 
comments are solicited from interested members of the public on all 
aspects of the interim final rule, including section III below. These 
comments must be submitted on or before June 3, 2020. SBA will consider 
these comments and the need for making any revisions as a result of 
these comments.

III. Paycheck Protection Program Requirements for Disbursements

Overview

    The CARES Act was enacted to provide immediate assistance to 
individuals, families, and organizations affected by the COVID-19 
emergency. Among the provisions contained in the CARES Act are 
provisions authorizing SBA to temporarily guarantee loans under the 
Paycheck Protection Program (PPP). Loans under the PPP will be 100 
percent guaranteed by SBA, and the full principal amount of the loans 
and any accrued interest may qualify for loan forgiveness. Additional 
information about the PPP is available in the First PPP Interim Final 
Rule (85 FR 20811), a second interim final rule (85 FR 20817) (the 
Second PPP Interim Final Rule), a third interim final rule (85 FR 
21747) (the Third PPP Interim Final Rule), a fourth interim final rule 
(85 FR 23450) (the Fourth PPP Interim Final Rule), and in an interim 
final rule issued by the Department of the Treasury, which was posted 
for public inspection at the Federal Register on April 28, 2020 (FR 
Doc. 2020-09239) (collectively, the PPP Interim Final Rules).

1. Disbursements

    a. Can a borrower take multiple draws from a PPP loan and thereby 
delay the start of the eight-week covered period?
    No. The lender must make a one-time, full disbursement of the PPP 
loan within ten calendar days of loan approval; for the purposes of 
this rule, a loan is considered approved when the loan is assigned a 
loan number by SBA.\1\ For loans that received an SBA loan number prior 
to the posting of this interim final rule but have not yet been fully 
disbursed, the following transition rules apply:
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    \1\ If the tenth calendar day is a Saturday, Sunday, or legal 
holiday, the period continues to run until the end of the next 
business day.

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     The ten calendar-day period described above begins on 
April 28, 2020.
     The eight-week covered period began on the date of first 
disbursement.
    Notwithstanding this limitation, lenders are not responsible for 
delays in disbursement attributable to a borrower's failure to timely 
provide required loan documentation, including a signed promissory 
note. Loans for which funds have not been disbursed because a borrower 
has not submitted required loan documentation within 20 calendar days 
of loan approval shall be cancelled by the lender, subject to the 
transition rules above. When disbursing loans, lenders must send any 
amount of loan proceeds designated for the refinance of an EIDL loan 
directly to SBA and not to the borrower.
    The Administrator, in consultation with the Secretary, determined 
that requiring a single loan disbursement will best serve the interests 
of both borrowers and lenders and promote the purposes of the CARES 
Act. A single loan disbursement will eliminate the risk of delays in 
processing loan disbursement installments, advance the goal of payroll 
continuity for employees, and provide borrowers with faster access to 
the full loan amount so that they can immediately cover payroll costs.
    b. By when must a lender electronically submit an SBA Form 1502 
indicating that PPP loan funds have been disbursed?
    SBA will make available a specific SBA Form 1502 reporting process 
through which PPP lenders will report on PPP loans and collect the 
processing fee on fully disbursed loans to which they are entitled. 
Lenders must electronically upload SBA Form 1502 information within 20 
calendar days after a PPP loan is approved or, for loans approved 
before availability of the updated SBA Form 1502 reporting process, by 
May 18, 2020. The lender must report on SBA Form 1502 whether it has 
fully disbursed PPP loan proceeds. A lender will not receive a 
processing fee: (1) Prior to full disbursement of the PPP loan; (2) if 
the PPP loan is cancelled before disbursement; or (3) 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). In addition to providing ACH credit information to direct 
payment of the requested processing fee, lenders will be required to 
confirm that all PPP loans for which the lender is requesting a 
processing fee have been fully disbursed on the disbursement dates and 
in the loan amounts reported. A lender must report through either Etran 
Servicing or the SBA Form 1502 report any PPP loans that have been 
cancelled before disbursement or that have been cancelled or 
voluntarily terminated and repaid after disbursement.
    The Administrator, in consultation with the Secretary, determined 
that requiring lenders to report on disbursement within 20 calendar 
days of loan approval ensures that disbursement of funds to eligible 
borrowers will occur more rapidly. This requirement also will enhance 
SBA's ability to track program data.
2. Additional Information
    SBA may provide further guidance, if needed, through SBA notices 
that will be posted on SBA's website at www.sba.gov. Questions on the 
Paycheck Protection Program may be directed to the Lender Relations 
Specialist in the local SBA Field Office. The local SBA Field Office 
may be found at https://www.sba.gov/tools/local-assistance/districtoffices.

Compliance With Executive Orders 12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Orders 12866, 13563, and 13771

    This interim final rule is economically significant for the 
purposes of Executive Orders 12866 and 13563, and is considered a major 
rule under the Congressional Review Act. SBA, however, is proceeding 
under the emergency provision at Executive Order 12866 Section 
6(a)(3)(D) based on the need to move expeditiously to mitigate the 
current economic conditions arising from the COVID-19 emergency. This 
rule's designation under Executive Order 13771 will be informed by 
public comment.

Executive Order 12988

    SBA has drafted this rule, to the extent practicable, in accordance 
with the standards set forth in section 3(a) and 3(b)(2) of Executive 
Order 12988, to minimize litigation, eliminate ambiguity, and reduce 
burden. The rule has no preemptive or retroactive effect.

Executive Order 13132

    SBA has determined that this rule will not have substantial direct 
effects on the States, on the relationship between the National 
Government and the States, or on the distribution of power and 
responsibilities among the various layers of government. Therefore, SBA 
has determined that this rule has no federalism implications warranting 
preparation of a federalism assessment.

Paperwork Reduction Act, 44 U.S.C. Chapter 35

    SBA has determined that this rule will not impose new or modify 
existing recordkeeping or reporting requirements under the Paperwork 
Reduction Act.

Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (RFA) generally requires that when 
an agency issues a proposed rule, or a final rule pursuant to section 
553(b) of the APA or another law, the agency must prepare a regulatory 
flexibility analysis that meets the requirements of the RFA and publish 
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to describe the impact of a 
rulemaking on small entities by providing a regulatory impact analysis. 
Such analysis must address the consideration of regulatory options that 
would lessen the economic effect of the rule on small entities. The RFA 
defines a ``small entity'' as (1) a proprietary firm meeting the size 
standards of the Small Business Administration (SBA); (2) a nonprofit 
organization that is not dominant in its field; or (3) a small 
government jurisdiction with a population of less than 50,000. 5 U.S.C. 
601(3)-(6). Except for such small government jurisdictions, neither 
State nor local governments are ``small entities.'' Similarly, for 
purposes of the RFA, individual persons are not small entities. The 
requirement to conduct a regulatory impact analysis does not apply if 
the head of the agency ``certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.'' 5 U.S.C. 605(b). The agency must, however, publish 
the certification in the Federal Register at the time of publication of 
the rule, ``along with a statement providing the factual basis for such 
certification.'' If the agency head has not waived the requirements for 
a regulatory flexibility analysis in accordance with the RFA's waiver 
provision, and no other RFA exception applies, the agency must prepare 
the regulatory flexibility analysis and publish it in the Federal 
Register at the time of promulgation or, if the rule is promulgated in 
response to an emergency that makes timely compliance impracticable, 
within 180 days of publication of the final rule. 5 U.S.C. 604(a), 
608(b).
    Rules that are exempt from notice and comment are also exempt from 
the RFA requirements, including conducting a

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regulatory flexibility analysis, when among other things the agency for 
good cause finds that notice and public procedure are impracticable, 
unnecessary, or contrary to the public interest. SBA Office of Advocacy 
guide: How to Comply with the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA is not required to conduct a regulatory flexibility 
analysis.

Jovita Carranza,
Administrator.
[FR Doc. 2020-09398 Filed 5-1-20; 8:45 am]
BILLING CODE P