[Federal Register Volume 85, Number 86 (Monday, May 4, 2020)]
[Rules and Regulations]
[Pages 26324-26326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09576]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket Number SBA-2020-0023]
RIN 3245-AH39


Business Loan Program Temporary Changes; Paycheck Protection 
Program--Requirements--Corporate Groups and Non-Bank and Non-Insured 
Depository Institution Lenders

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 announcing the implementation of the 
Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The 
CARES Act temporarily adds a new program, titled the ``Paycheck 
Protection Program,'' to the SBA's 7(a) Loan Program. The CARES 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, April 24, 2020, and April 28, 2020, and the 
Department of the Treasury posted an additional interim final rule on 
April 28, 2020. This interim final rule supplements the previously 
posted interim final rules by limiting the amount of PPP loans that any 
single corporate group may receive and provides additional guidance on 
the criteria for non-bank lender participation in the PPP, 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-2020-0023 
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) (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 CARES 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 CARES 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 CARES 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.
    As described below, to preserve the limited resources available to 
the PPP program, this interim final rule limits the aggregate amount of 
PPP loans that any single corporate group may receive. This interim 
final rule also provides additional guidance regarding lenders eligible 
to make PPP loans.

II. Comments and Immediate Effective Date

    The intent of the CARES 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 certain 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 CARES Act authorizes SBA to issue 
regulations to implement Title I of the CARES 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 this 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.

[[Page 26325]]

III. Paycheck Protection Program Requirements for Corporate Groups and 
Non-Bank and Non-Insured Depository Institution Lenders

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 SBA's first PPP interim final 
rule (85 FR 20811) (the First Interim Final Rule), second interim final 
rule (85 FR 20817), third interim final rule (85 FR 21747), and fourth 
interim final rule (85 FR 23450), in an interim final rule issued by 
the Department of the Treasury, which was posted on April 28, 2020, and 
in SBA's fifth interim final rule, which was posted on April 28, 2020.
1. Can a single corporate group receive unlimited PPP loans?
    No. To preserve the limited resources available to the PPP program, 
and in light of the previous lapse of PPP appropriations and the high 
demand for PPP loans, businesses that are part of a single corporate 
group shall in no event receive more than $20,000,000 of PPP loans in 
the aggregate.\1\ For purposes of this limit, businesses are part of a 
single corporate group if they are majority owned, directly or 
indirectly, by a common parent. This limitation shall be immediately 
effective with respect to any loan that has not yet been fully 
disbursed as of April 30, 2020.\2\
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    \1\ The Administrator has authority to issue ``such rules and 
regulations as [the Administrator] deems necessary to carry out the 
authority vested in him by or pursuant to'' 15 U.S.C. Chapter 14A, 
including authorities established under section 1102 of the CARES 
Act. Section 1102 provides that the Administrator ``may'' guarantee 
loans under the terms and conditions set forth in section 7(a) of 
the Small Business Act, and those conditions specify a ``maximum''--
but not a minimum--loan amount. See 15 U.S.C. 636(a)(36)(B), (E); 
see also CARES Act section 1106(k) (authorizing SBA to issue 
regulations to govern loan forgiveness). To preserve finite 
appropriations for PPP loans and ensure broad access for eligible 
borrowers, the Administrator, in consultation with the Secretary, 
has determined that an aggregate limitation on loans to a single 
corporate group is necessary and appropriate.
    \2\ For loans that have been partially disbursed, this 
limitation applies to any additional disbursement that would cause 
the total PPP loans to a single corporate group to exceed $20 
million.
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    It is the responsibility of an applicant for a PPP loan to notify 
the lender if the applicant has applied for or received PPP loans in 
excess of the amount permitted by this interim final rule and withdraw 
or request cancellation of any pending PPP loan application or approved 
PPP loan not in compliance with the limitation set forth in this rule. 
Failure by the applicant to do so will be regarded as a use of PPP 
funds for unauthorized purposes, and the loan will not be eligible for 
forgiveness. A lender may rely on an applicant's representation 
concerning the applicant's compliance with this limitation.
    The Administrator, in consultation with the Secretary, determined 
that limiting the amount of PPP loans that a single corporate group may 
receive will promote the availability of PPP loans to the largest 
possible number of borrowers, consistent with the CARES Act. The 
Administrator has concluded that a limitation of $20,000,000 strikes an 
appropriate balance between broad availability of PPP loans and program 
resource constraints.
    SBA's affiliation rules, which relate to an applicant's eligibility 
for PPP loans, and any waiver of those rules under the CARES Act, 
continue to apply independent of this limitation. Businesses are 
subject to this limitation even if the businesses are eligible for the 
waiver-of-affiliation provision under the CARES Act or are otherwise 
not considered to be affiliates under SBA's affiliation rules.\3\
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    \3\ See Section 7(a)(36)(D)(iv) of the Small Business Act (15 
U.S.C. 636(a)(36)(D)(iv), as added by the CARES Act; 13 CFR 
121.103(b).
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    This rule has no effect on lender obligations required to obtain an 
SBA guarantee for PPP loans.
2. Non-Bank and Non-Insured Depository Institution Lenders
    a. Can a non-bank lender or non-insured depository institution be 
approved to be a lender in the PPP if it has originated, maintained, or 
serviced--but not performed all three of these functions for--more than 
$50 million in business loans or other commercial financial receivables 
during a 12-month period in the past 36 months?
    Yes. The First Interim Final Rule provides that a non-bank lender 
or non-insured depository institution may be eligible to be a lender in 
the PPP if the lender has originated, maintained, and serviced more 
than $50 million in business loans or other commercial financial 
receivables during a 12-month period in the past 36 months, in addition 
to satisfying certain other requirements. To ensure broad and diverse 
lender participation, SBA and the Department of the Treasury have also 
determined that such lenders may be approved to make PPP loans if the 
lender has performed the required volume of any one of these three 
functions (originating, maintaining, or servicing).
    b. Can a non-bank lender that does not meet the $50 million 
threshold in the First Interim Final Rule for originating, maintaining, 
and servicing loans or receivables apply to be a lender in the PPP?
    Yes. As described in the First Interim Final Rule, a non-bank 
lender may be eligible to be a lender in the PPP if the lender has 
originated, maintained, and serviced more than $50 million in business 
loans or other commercial financial receivables during a 12-month 
period in the past 36 months, in addition to satisfying certain other 
requirements. In addition, SBA and the Department of the Treasury have 
determined that a non-bank lender meets the criteria to be a PPP lender 
and may be approved to make PPP loans if it has originated, maintained, 
or serviced more than $10 million in business loans or other commercial 
financial receivables during a 12-month period in the past 36 months, 
if the non-bank lender is (1) a community development financial 
institution (other than a federally insured bank or federally insured 
credit union) or (2) a majority minority-, women-, or veteran/military-
owned lender. Consistent with the First Interim Final Rule, a lender is 
ineligible if it currently is designated in Troubled Condition by its 
primary federal regulator or is subject to a formal enforcement action 
with its primary federal regulator that addresses unsafe or unsound 
lending practices. An applicant that meets this $10 million threshold 
but does not meet the $50 million threshold that is otherwise 
applicable should leave blank the attestation on CARES Act Section 1102 
Lender Agreement--Non-Bank and Non-Insured Depository Institution 
Lenders (SBA Form 3507) related to the $50 million threshold and 
instead include with its application an attestation stating: ``Lender 
attests that it has originated, maintained, or serviced more than $10 
million in business loans or other commercial financial receivables 
during a consecutive 12 month period in the past 36 months.''
3. Additional Information
    SBA may provide further guidance, if needed, through SBA notices 
that will be posted on SBA's website at

[[Page 26326]]

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 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. 2020-09576 Filed 5-1-20; 8:45 am]
 BILLING CODE P