This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

20811 

Vol. 85, No. 73 

Wednesday, April 15, 2020 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

[Docket No. SBA–2020–0015] 

RIN 3245–AH34 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Interim final rule. 

SUMMARY: This interim final rule 

announces the implementation of 

sections 1102 and 1106 of the 

Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act or the Act). 

Section 1102 of the Act temporarily 

adds a new product, titled the 

‘‘Paycheck Protection Program,’’ to the 

U.S. Small Business Administration’s 

(SBA’s) 7(a) Loan 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. The 

Paycheck Protection Program and loan 

forgiveness are intended to provide 

economic relief to small businesses 

nationwide adversely impacted under 

the Coronavirus Disease 2019 (COVID– 

19) Emergency Declaration (COVID–19

Emergency Declaration) issued by

President Trump on March 13, 2020.

This interim final rule outlines the key

provisions of SBA’s implementation of

sections 1102 and 1106 of the Act in

formal guidance and requests public

comment.

DATES: 

Effective date: This interim final rule 

is effective April 15, 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 May 15, 2020. 

ADDRESSES: You may submit comments, 

identified by number SBA–2020–0015 

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 ppp-ifr@sba.gov. 

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: 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, 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-athome 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. 

A more detailed discussion of sections 

1102 and 1106 of the Act is found in 

section III below. 

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, small businesses need to be

informed on how to apply for a loan and

the terms of the loan under section 1102

of the Act as soon as possible because

the last day to apply for and receive a

loan is June 30, 2020. The immediate

effective date of this interim final rule

will benefit small businesses so that

they can immediately apply for the loan

with a full understanding of loan terms

and conditions. 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 1 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 May 15, 2020.

The SBA will consider these comments

and the need for making any revisions

as a result of these comments.

III. Temporary New Business Loan

Program: Paycheck Protection Program

Overview 

The CARES Act was enacted to 

provide immediate assistance to 

individuals, families, and businesses 


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20812 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 

affected by the COVID–19 emergency. 

Among the provisions contained in the 

CARES Act are provisions authorizing 

SBA to temporarily guarantee loans 

under a new 7(a) loan program titled the 

‘‘Paycheck Protection Program.’’ Loans 

guaranteed under the Paycheck 

Protection Program (PPP) will be 100 

percent guaranteed by SBA, and the full 

principal amount of the loans may 

qualify for loan forgiveness. The 

following outlines the key provisions of 

the PPP. 

1. General 

SBA is authorized to guarantee loans 

under the PPP through June 30, 2020. 

Congress authorized a program level of 

$349,000,000,000 to provide guaranteed 

loans under this new 7(a) program. The 

intent of the Act is that SBA provide 

relief to America’s small businesses 

expeditiously, which is expressed in the 

Act by giving all lenders delegated 

authority and streamlining the 

requirements of the regular 7(a) loan 

program. For example, for loans made 

under the PPP, SBA will not require the 

lenders to comply with section 120.150 

‘‘What are SBA’s lending criteria?.’’ SBA 

will allow lenders to rely on 

certifications of the borrower in order to 

determine eligibility of the borrower 

and use of loan proceeds and to rely on 

specified documents provided by the 

borrower to determine qualifying loan 

amount and eligibility for loan 

forgiveness. Lenders must comply with 

the applicable lender obligations set 

forth in this interim final rule, but will 

be held harmless for borrowers’ failure 

to comply with program criteria; 

remedies for borrower violations or 

fraud are separately addressed in this 

interim final rule. The program 

requirements of the PPP identified in 

this rule temporarily supersede any 

conflicting Loan Program Requirement 

(as defined in 13 CFR 120.10). 

2. What do borrowers need to know and 

do? 

a. Am I eligible? 

You are eligible for a PPP loan if you 

have 500 or fewer employees whose 

principal place of residence is in the 

United States, or are a business that 

operates in a certain industry and meet 

the applicable SBA employee-based size 

standards for that industry, and: 

i. You are: 

A. A small business concern as 

defined in section 3 of the Small 

Business Act (15 U.S.C. 632), and 

subject to SBA’s affiliation rules under 

13 CFR 121.301(f) unless specifically 

waived in the Act; or 

B. A tax-exempt nonprofit 

organization described in section 

501(c)(3) of the Internal Revenue Code 

(IRC), a tax-exempt veterans 

organization described in section 

501(c)(19) of the IRC, Tribal business 

concern described in section 31(b)(2)(C) 

of the Small Business Act, or any other 

business; and 

ii. You were in operation on February 

15, 2020 and either had employees for 

whom you paid salaries and payroll 

taxes or paid independent contractors, 

as reported on a Form 1099–MISC. 

You are also eligible for a PPP loan if 

you are an individual who operates 

under a sole proprietorship or as an 

independent contractor or eligible selfemployed individual, and you were in 

operation on February 15, 2020. 

You must also submit such 

documentation as is necessary to 

establish eligibility such as payroll 

processor records, payroll tax filings, or 

Form 1099–MISC, or income and 

expenses from a sole proprietorship. For 

borrowers that do not have any such 

documentation, the borrower must 

provide other supporting 

documentation, such as bank records, 

sufficient to demonstrate the qualifying 

payroll amount. 

SBA intends to promptly issue 

additional guidance with regard to the 

applicability of affiliation rules at 13 

CFR 121.103 and 121.301 to PPP loans. 

b. Could I be ineligible even if I meet the 

eligibility requirements in (a) above? 

You are ineligible for a PPP loan if, for 

example: 

i. You are engaged in any activity that 

is illegal under Federal, state, or local 

law; 

ii. You are a household employer 

(individuals who employ household 

employees such as nannies or 

housekeepers); 

iii. An owner of 20 percent or more 

of the equity of the applicant is 

incarcerated, on probation, on parole; 

presently subject to an indictment, 

criminal information, arraignment, or 

other means by which formal criminal 

charges are brought in any jurisdiction; 

or has been convicted of a felony within 

the last five years; or 

iv. You, or any business owned or 

controlled by you or any of your 

owners, has ever obtained a direct or 

guaranteed loan from SBA or any other 

Federal agency that is currently 

delinquent or has defaulted within the 

last seven years and caused a loss to the 

government. 

The Administrator, in consultation 

with the Secretary of the Treasury (the 

Secretary), determined that household 

employers are ineligible because they 

are not businesses. 13 CFR 120.100. 

c. How do I determine if I am ineligible? 

Businesses that are not eligible for 

PPP loans are identified in 13 CFR 

120.110 and described further in SBA’s 

Standard Operating Procedure (SOP) 50 

10, Subpart B, Chapter 2, except that 

nonprofit organizations authorized 

under the Act are eligible. (SOP 50 10 

can be found at https://www.sba.gov/ 

document/sop-50-10-5-lenderdevelopment-company-loan-programs.) 

d. I have determined that I am eligible. 

How much can I borrow? 

Under the PPP, the maximum loan 

amount is the lesser of $10 million or 

an amount that you will calculate using 

a payroll-based formula specified in the 

Act, as explained below. 

e. How do I calculate the maximum 

amount I can borrow? 

The following methodology, which is 

one of the methodologies contained in 

the Act, will be most useful for many 

applicants. 

i. Step 1: Aggregate payroll costs 

(defined in detail below in f.) from the 

last twelve months for employees whose 

principal place of residence is the 

United States. 

ii. Step 2: Subtract any compensation 

paid to an employee in excess of an 

annual salary of $100,000 and/or any 

amounts paid to an independent 

contractor or sole proprietor in excess of 

$100,000 per year. 

iii. Step 3: Calculate average monthly 

payroll costs (divide the amount from 

Step 2 by 12). 

iv. Step 4: Multiply the average 

monthly payroll costs from Step 3 by 

2.5. 

v. Step 5: Add the outstanding 

amount of an Economic Injury Disaster 

Loan (EIDL) made between January 31, 

2020 and April 3, 2020, less the amount 

of any ‘‘advance’’ under an EIDL 

COVID–19 loan (because it does not 

have to be repaid). 

The examples below illustrate this 

methodology. 

i. Example 1—No employees make more 

than $100,000 

Annual payroll: $120,000 

Average monthly payroll: $10,000 

Multiply by 2.5 = $25,000 

Maximum loan amount is $25,000 

ii. Example 2—Some employees make 

more than $100,000 

Annual payroll: $1,500,000 

Subtract compensation amounts in 

excess of an annual salary of 

$100,000: $1,200,000 

Average monthly qualifying payroll: 

$100,000 

Multiply by 2.5 = $250,000 

Maximim loan amount is $250,000 


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iii. Example 3—No employees make 

more than $100,000, outstanding 

EIDL loan of $10,000. 

Annual payroll: $120,000 

Average monthly payroll: $10,000 

Multiply by 2.5 = $25,000 

Add EIDL loan of $10,000 = $35,000 

Maximum loan amount is $35,000 

iv. Example 4—Some employees make 

more than $100,000, outstanding 

EIDL loan of $10,000 

Annual payroll: $1,500,000 

Subtract compensation amounts in 

excess of an annual salary of 

$100,000: $1,200,000 

Average monthly qualifying payroll: 

$100,000 

Multiply by 2.5 = $250,000 

Add EIDL loan of $10,000 = $260,000 

Maximum loan amount is $260,000 

f. What qualifies as ‘‘payroll costs?’’ 

Payroll costs consist of compensation 

to employees (whose principal place of 

residence is the United States) in the 

form of salary, wages, commissions, or 

similar compensation; cash tips or the 

equivalent (based on employer records 

of past tips or, in the absence of such 

records, a reasonable, good-faith 

employer estimate of such tips); 

payment for vacation, parental, family, 

medical, or sick leave; allowance for 

separation or dismissal; payment for the 

provision of employee benefits 

consisting of group health care coverage, 

including insurance premiums, and 

retirement; payment of state and local 

taxes assessed on compensation of 

employees; and for an independent 

contractor or sole proprietor, wages, 

commissions, income, or net earnings 

from self-employment, or similar 

compensation. 

g. Is there anything that is expressly 

excluded from the definition of payroll 

costs? 

Yes. The Act expressly excludes the 

following: 

i. Any compensation of an employee 

whose principal place of residence is 

outside of the United States; 

ii. The compensation of an individual 

employee in excess of an annual salary 

of $100,000, prorated as necessary; 

iii. Federal employment taxes 

imposed or withheld between February 

15, 2020 and June 30, 2020, including 

the employee’s and employer’s share of 

FICA (Federal Insurance Contributions 

Act) and Railroad Retirement Act taxes, 

and income taxes required to be 

withheld from employees; and 

iv. Qualified sick and family leave 

wages for which a credit is allowed 

under sections 7001 and 7003 of the 

Families First Coronavirus Response 

Act (Pub. L. 116–127). 

h. Do independent contractors count as 

employees for purposes of PPP loan 

calculations? 

No, independent contractors have the 

ability to apply for a PPP loan on their 

own so they do not count for purposes 

of a borrower’s PPP loan calculation. 

i. What is the interest rate on a PPP 

loan? 

The interest rate will be 100 basis 

points or one percent. 

The Administrator, in consultation 

with the Secretary, determined that a 

one percent interest rate is appropriate. 

First, it provides low cost funds to 

borrowers to meet eligible payroll costs 

and other eligible expenses during this 

temporary period of economic 

dislocation caused by the coronavirus. 

Second, for lenders, the 100 basis points 

offers an attractive interest rate relative 

to the cost of funding for comparable 

maturities. For example, the FDIC’s 

weekly national average rate for a 24- 

month CD deposit product for the week 

of March 30, 2020 is 42 basis points for 

non-jumbo and 44 basis points for 

jumbo (https://www.fdic.gov/ 

regulations/resources/rates/). Third, the 

interest rate is higher than the yield on 

Treasury securities of comparable 

maturity. For example, the yield on the 

Treasury two-year note is approximately 

23 basis points. This higher yield 

combined with the fact that the loans 

are 100 percent guaranteed by the SBA 

and the fact that lenders will receive a 

substantial processing fee from the SBA 

provide ample inducement for lenders 

to participate in the PPP. 

j. What will be the maturity date on a 

PPP loan? 

The maturity is two years. While the 

Act provides that a loan will have a 

maximum maturity of up to ten years 

from the date the borrower applies for 

loan forgiveness (described below), the 

Administrator, in consultation with the 

Secretary, determined that a two year 

loan term is sufficient in light of the 

temporary economic dislocations 

caused by the coronavirus. Specifically, 

the considerable economic disruption 

caused by the coronavirus is expected to 

abate well before the two year maturity 

date such that borrowers will be able to 

re-commence business operations and 

pay off any outstanding balances on 

their PPP loans. 

k. Can I apply for more than one PPP 

loan? 

No. The Administrator, in 

consultation with the Secretary, 

determined that no eligible borrower 

may receive more than one PPP loan. 

This means that if you apply for a PPP 

loan you should consider applying for 

the maximum amount. While the Act 

does not expressly provide that each 

eligible borrower may only receive one 

PPP loan, the Administrator has 

determined, in consultation with the 

Secretary, that because all PPP loans 

must be made on or before June 30, 

2020, a one loan per borrower limitation 

is necessary to help ensure that as many 

eligible borrowers as possible may 

obtain a PPP loan. This limitation will 

also help advance Congress’ goal of 

keeping workers paid and employed 

across the United States. 

l. Can I use e-signatures or e-consents if 

a borrower has multiple owners? 

Yes, e-signature or e-consents can be 

used regardless of the number of 

owners. 

m. Is the PPP ‘‘first-come, first-served?’’ 

Yes. 

n. When will I have to begin paying 

principal and interest on my PPP loan? 

You will not have to make any 

payments for six months following the 

date of disbursement of the loan. 

However, interest will continue to 

accrue on PPP loans during this sixmonth deferment. The Act authorizes 

the Administrator to defer loan 

payments for up to one year. The 

Administrator determined, in 

consultation with the Secretary, that a 

six-month deferment period is 

appropriate in light of the modest 

interest rate (one percent) on PPP loans 

and the loan forgiveness provisions 

contained in the Act. 

o. Can my PPP loan be forgiven in 

whole or in part? 

Yes. The amount of loan forgiveness 

can be up to the full principal amount 

of the loan and any accrued interest. 

That is, the borrower will not be 

responsible for any loan payment if the 

borrower uses all of the loan proceeds 

for forgiveable purposes described 

below and employee and compensation 

levels are maintained. The actual 

amount of loan forgiveness will depend, 

in part, on the total amount of payroll 

costs, payments of interest on mortgage 

obligations incurred before February 15, 

2020, rent payments on leases dated 

before February 15, 2020, and utility 

payments under service agreements 

dated before February 15, 2020, over the 

eight-week period following the date of 

the loan. However, not more than 25 

percent of the loan forgiveness amount 

may be attributable to non-payroll costs. 

While the Act provides that borrowers 

are eligible for forgiveness in an amount 

equal to the sum of payroll costs and 


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20814 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 

1A representative of the applicant can certify for 

the business as a whole if the representative is 

legally authorized to do so. 

any payments of mortgage interest, rent, 

and utilities, the Administrator has 

determined that the non-payroll portion 

of the forgivable loan amount should be 

limited to effectuate the core purpose of 

the statute and ensure finite program 

resources are devoted primarily to 

payroll. The Administrator has 

determined in consultation with the 

Secretary that 75 percent is an 

appropriate percentage in light of the 

Act’s overarching focus on keeping 

workers paid and employed. Further, 

the Administrator and the Secretary 

believe that applying this threshold to 

loan forgiveness is consistent with the 

structure of the Act, which provides a 

loan amount 75 percent of which is 

equivalent to eight weeks of payroll (8 

weeks/2.5 months = 56 days/76 days = 

74 percent rounded up to 75 percent). 

Limiting non-payroll costs to 25 percent 

of the forgiveness amount will align 

these elements of the program, and will 

also help to ensure that the finite 

appropriations available for PPP loan 

forgiveness are directed toward payroll 

protection. SBA will issue additional 

guidance on loan forgiveness. 

p. Do independent contractors count as 

employees for purposes of PPP loan 

forgiveness? 

No, independent contractors have the 

ability to apply for a PPP loan on their 

own so they do not count for purposes 

of a borrower’s PPP loan forgiveness. 

q. What forms do I need and how do I 

submit an application? 

The applicant must submit SBA Form 

2483 (Paycheck Protection Program 

Application Form) and payroll 

documentation, as described above. The 

lender must submit SBA Form 2484 

(Paycheck Protection Program Lender’s 

Application for 7(a) Loan Guaranty) 

electronically in accordance with 

program requirements and maintain the 

forms and supporting documentation in 

its files. 

r. How can PPP loans be used? 

The proceeds of a PPP loan are to be 

used for: 

i. payroll costs (as defined in the Act 

and in 2.f.); 

ii. costs related to the continuation of 

group health care benefits during 

periods of paid sick, medical, or family 

leave, and insurance premiums; 

iii. mortgage interest payments (but 

not mortgage prepayments or principal 

payments); 

iv. rent payments; 

v. utility payments; 

vi. interest payments on any other 

debt obligations that were incurred 

before February 15, 2020; and/or 

vii. refinancing an SBA EIDL loan 

made between January 31, 2020 and 

April 3, 2020. If you received an SBA 

EIDL loan from January 31, 2020 

through April 3, 2020, you can apply for 

a PPP loan. If your EIDL loan was not 

used for payroll costs, it does not affect 

your eligibility for a PPP loan. If your 

EIDL loan was used for payroll costs, 

your PPP loan must be used to refinance 

your EIDL loan. Proceeds from any 

advance up to $10,000 on the EIDL loan 

will be deducted from the loan 

forgiveness amount on the PPP loan. 

However, at least 75 percent of the 

PPP loan proceeds shall be used for 

payroll costs. For purposes of 

determining the percentage of use of 

proceeds for payroll costs, the amount 

of any EIDL refinanced will be included. 

For purposes of loan forgiveness, 

however, the borrower will have to 

document the proceeds used for payroll 

costs in order to determine the amount 

of forgiveness. While the Act provides 

that PPP loan proceeds may be used for 

the purposes listed above and for other 

allowable uses described in section 7(a) 

of the Small Business Act (15 U.S.C. 

636(a)), the Administrator believes that 

finite appropriations and the structure 

of the Act warrant a requirement that 

borrowers use a substantial portion of 

the loan proceeds for payroll costs, 

consistent with Congress’ overarching 

goal of keeping workers paid and 

employed. As with the similar 

limitation on the forgiveness amount 

explained earlier, the Administrator, in 

consultation with the Secretary, has 

determined that 75 percent is an 

appropriate percentage that will align 

this element of the program with the 

loan amount, 75 percent of which is 

equivalent to eight weeks of payroll. 

This limitation on use of the loan funds 

will help to ensure that the finite 

appropriations available for these loans 

are directed toward payroll protection, 

as each loan that is issued depletes the 

appropriation, regardless of whether 

portions of the loan are later forgiven. 

s. What happens if PPP loan funds are 

misused? 

If you use PPP funds for unauthorized 

purposes, SBA will direct you to repay 

those amounts. If you knowingly use the 

funds for unauthorized purposes, you 

will be subject to additional liability 

such as charges for fraud. If one of your 

shareholders, members, or partners uses 

PPP funds for unauthorized purposes, 

SBA will have recourse against the 

shareholder, member, or partner for the 

unauthorized use. 

t. What certifications need to be made? 

On the Paycheck Protection Program 

application, an authorized 

representative of the applicant must 

certify in good faith to all of the below: 1

i. The applicant was in operation on 

February 15, 2020 and had employees 

for whom it paid salaries and payroll 

taxes or paid independent contractors, 

as reported on a Form 1099–MISC. 

ii. Current economic uncertainty 

makes this loan request necessary to 

support the ongoing operations of the 

applicant. 

iii. The funds will be used to retain 

workers and maintain payroll or make 

mortgage interest payments, lease 

payments, and utility payments; I 

understand that if the funds are 

knowingly used for unauthorized 

purposes, the Federal Government may 

hold me legally liable such as for 

charges of fraud. As explained above, 

not more than 25 percent of loan 

proceeds may be used for non-payroll 

costs. 

iv. Documentation verifying the 

number of full-time equivalent 

employees on payroll as well as the 

dollar amounts of payroll costs, covered 

mortgage interest payments, covered 

rent payments, and covered utilities for 

the eight week period following this 

loan will be provided to the lender. 

v. Loan forgiveness will be provided 

for the sum of documented payroll 

costs, covered mortgage interest 

payments, covered rent payments, and 

covered utilities. As explained above, 

not more than 25 percent of the forgiven 

amount may be for non-payroll costs. 

vi. During the period beginning on 

February 15, 2020 and ending on 

December 31, 2020, the applicant has 

not and will not receive another loan 

under this program. 

vii. I further certify that the 

information provided in this application 

and the information provided in all 

supporting documents and forms is true 

and accurate in all material respects. I 

understand that knowingly making a 

false statement to obtain a guaranteed 

loan from SBA is punishable under the 

law, including under 18 U.S.C. 1001 

and 3571 by imprisonment of not more 

than five years and/or a fine of up to 

$250,000; under 15 U.S.C. 645 by 

imprisonment of not more than two 

years and/or a fine of not more than 

$5,000; and, if submitted to a federally 

insured institution, under 18 U.S.C. 

1014 by imprisonment of not more than 

thirty years and/or a fine of not more 

than $1,000,000. 


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viii. I acknowledge that the lender 

will confirm the eligible loan amount 

using tax documents I have submitted. 

I affirm that these tax documents are 

identical to those submitted to the 

Internal Revenue Service. I also 

understand, acknowledge, and agree 

that the Lender can share the tax 

information with SBA’s authorized 

representatives, including authorized 

representatives of the SBA Office of 

Inspector General, for the purpose of 

compliance with SBA Loan Program 

Requirements and all SBA reviews. 

3. What do lenders need to know and 

do? 

a. Who is eligible to make PPP loans? 

i. All SBA 7(a) lenders are 

automatically approved to make PPP 

loans on a delegated basis. 

ii. The Act provides that the authority 

to make PPP loans can be extended to 

additional lenders determined by the 

Administrator and the Secretary to have 

the necessary qualifications to process, 

close, disburse, and service loans made 

with the SBA guarantee. Since SBA is 

authorized to make PPP loans up to 

$349 billion by June 30, 2020, the 

Adminstrator and the Secretary have 

jointly determined that authorizing 

additional lenders is necessary to 

achieve the purpose of allowing as 

many eligible borrowers as possible to 

receive loans by the June 30, 2020 

deadline. 

iii. The following types of lenders 

have been determined to meet the 

criteria and are eligible to make PPP 

loans unless they currently are 

designated in Troubled Condition by 

their primary Federal regulator or are 

subject to a formal enforcement action 

with their primary Federal regulator that 

addresses unsafe or unsound lending 

practices: 

I. Any federally insured depository 

institution or any federally insured 

credit union; 

II. Any Farm Credit System institution 

(other than the Federal Agricultural 

Mortgage Corporation) as defined in 12 

U.S.C. 2002(a) that applies the 

requirements under the Bank Secrecy 

Act and its implementing regulations 

(collectively, BSA) as a federally 

regulated financial institution, or 

functionally equivalent requirements 

that are not altered by this rule; and 

III. Any depository or non-depository 

financing provider that originates, 

maintains, and services business loans 

or other commercial financial 

receivables and participation interests; 

has a formalized compliance program; 

applies the requirements under the BSA 

as a federally regulated financial 

institution, or the BSA requirements of 

an equivalent federally regulated 

financial institution; has been operating 

since at least February 15, 2019, and has 

originated, maintained, and serviced 

more than $50 million in business loans 

or other commercial financial 

receivables during a consecutive 12 

month period in the past 36 months, or 

is a service provider to any insured 

depository institution that has a contract 

to support such institution’s lending 

activities in accordance with 12 U.S.C. 

1867(c) and is in good standing with the 

appropriate Federal banking agency. 

iv. Qualified institutions described in 

3.a.iii.I. and II. will be automatically 

qualified under delegated authority by 

the SBA upon transmission of CARES 

Act Section 1102 Lender Agreement 

(SBA Form 3506) unless they currently 

are designated in Troubled Condition by 

their primary Federal regulator or are 

subject to a formal enforcement action 

by their primary Federal regulator that 

addresses unsafe or unsound lending 

practices. 

b. What do lenders have to do in terms 

of loan underwriting? 

Each lender shall: 

i. Confirm receipt of borrower 

certifications contained in Paycheck 

Protection Program Application form 

issued by the Administration; 

ii. Confirm receipt of information 

demonstrating that a borrower had 

employees for whom the borrower paid 

salaries and payroll taxes on or around 

February 15, 2020; 

iii. Confirm the dollar amount of 

average monthly payroll costs for the 

preceding calendar year by reviewing 

the payroll documentation submitted 

with the borrower’s application; and 

iv. Follow applicable BSA 

requirements: 

I. Federally insured depository 

institutions and federally insured credit 

unions should continue to follow their 

existing BSA protocols when making 

PPP loans to either new or existing 

customers who are eligible borrowers 

under the PPP. PPP loans for existing 

customers will not require reverification under applicable BSA 

requirements, unless otherwise 

indicated by the institution’s risk-based 

approach to BSA compliance. 

II. Entities that are not presently 

subject to the requirements of the BSA, 

should, prior to engaging in PPP lending 

activities, including making PPP loans 

to either new or existing customers who 

are eligible borrowers under the PPP, 

establish an anti-money laundering 

(AML) compliance program equivalent 

to that of a comparable federally 

regulated institution. Depending upon 

the comparable federally regulated 

institution, such a program may include 

a customer identification program (CIP), 

which includes identifying and 

verifying their PPP borrowers’ identities 

(including e.g., date of birth, address, 

and taxpayer identification number), 

and, if that PPP borrower is a company, 

following any applicable beneficial 

ownership information collection 

requirements. Alternatively, if available, 

entities may rely on the CIP of a 

federally insured depository institution 

or federally insured credit union with 

an established CIP as part of its AML 

program. In either instance, entities 

should also understand the nature and 

purpose of their PPP customer 

relationships to develop customer risk 

profiles. Such entities will also 

generally have to identify and report 

certain suspicious activity to the U.S. 

Department of the Treasury’s Financial 

Crimes Enforcement Network (FinCEN). 

If such entities have questions with 

regard to meeting these requirements, 

they should contact the FinCEN 

Regulatory Support Section at FRC@

fincen.gov. In addition, FinCEN has 

created a COVID–19-specific contact 

channel, via a specific drop-down 

category, for entities to communicate to 

FinCEN COVID–19-related concerns 

while adhering to their BSA obligations. 

Entities that wish to communicate such 

COVID–19-related concerns to FinCEN 

should go to www.FinCEN.gov, click on 

‘‘Need Assistance,’’ and select 

‘‘COVID19’’ in the subject drop-down 

list. 

Each lender’s underwriting obligation 

under the PPP is limited to the items 

above and reviewing the ‘‘Paycheck 

Protection Application Form.’’ 

Borrowers must submit such 

documentation as is necessary to 

establish eligibility such as payroll 

processor records, payroll tax filings, or 

Form 1099–MISC, or income and 

expenses from a sole proprietorship. For 

borrowers that do not have any such 

documentation, the borrower must 

provide other supporting 

documentation, such as bank records, 

sufficient to demonstrate the qualifying 

payroll amount. 

c. Can lenders rely on borrower 

documentation for loan forgiveness? 

Yes. The lender does not need to 

conduct any verification if the borrower 

submits documentation supporting its 

request for loan forgiveness and attests 

that it has accurately verified the 

payments for eligible costs. The 

Administrator will hold harmless any 

lender that relies on such borrower 

documents and attestation from a 

borrower. The Administrator, in 


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20816 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 

consultation with the Secretary, has 

determined that lender reliance on a 

borrower’s required documents and 

attestation is necessary and appropriate 

in light of section 1106(h) of the Act, 

which prohibits the Administrator from 

taking an enforcement action or 

imposing penalties if the lender has 

received a borrower attestation. 

d. What fees will lenders be paid? 

SBA will pay lenders fees for 

processing PPP loans in the following 

amounts: 

i. Five (5) percent for loans of not 

more than $350,000; 

ii. Three (3) percent for loans of more 

than $350,000 and less than $2,000,000; 

and 

iii. One (1) percent for loans of at least 

$2,000,000. 

e. Do lenders have to apply the ‘‘credit 

elsewhere test’’? 

No. When evaluating an applicant’s 

eligibility lenders will not be required to 

apply the ‘‘credit elsewhere test’’ (as set 

forth in section 7(a)(1)(A) of the Small 

Business Act (15 U.S.C. 636) and SBA 

regulations at 13 CFR 120.101)). 

4. What do both borrowers and lenders 

need to know and do? 

a. What are the loan terms and 

conditions? 

Loans will be guaranteed under the 

PPP under the same terms, conditions 

and processes as other 7(a) loans, with 

certain changes including but not 

limited to: 

i. The guarantee percentage is 100 

percent. 

ii. No collateral will be required. 

iii. No personal guarantees will be 

required. 

iv. The interest rate will be 100 basis 

points or one percent. 

v. All loans will be processed by all 

lenders under delegated authority and 

lenders will be permitted to rely on 

certifications of the borrower in order to 

determine eligibility of the borrower 

and the use of loan proceeds. 

b. Are there any fee waivers? 

i. There will be no up-front guarantee 

fee payable to SBA by the Borrower; 

ii. There will be no lender’s annual 

service fee (‘‘on-going guaranty fee’’) 

payable to SBA; 

iii. There will be no subsidy 

recoupment fee; and 

iv. There will be no fee payable to 

SBA for any guarantee sold into the 

secondary market. 

c. Who pays the fee to an agent who 

assists a borrower? 

Agent fees will be paid by the lender 

out of the fees the lender receives from 

SBA. Agents may not collect fees from 

the borrower or be paid out of the PPP 

loan proceeds. The total amount that an 

agent may collect from the lender for 

assistance in preparing an application 

for a PPP loan (including referral to the 

lender) may not exceed: 

i. One (1) percent for loans of not 

more than $350,000; 

ii. 0.50 percent for loans of more than 

$350,000 and less than $2 million; and 

iii. 0.25 percent for loans of at least $2 

million. 

The Act authorizes the Administrator 

to establish limits on agent fees. The 

Administrator, in consultation with the 

Secretary, determined that the agent fee 

limits set forth above are reasonable 

based upon the application req 

uirements and the fees that lenders 

receive for making PPP loans. 

d. Can PPP loans be sold into the 

secondary market? 

Yes. A PPP loan may be sold on the 

secondary market after the loan is fully 

disbursed. A PPP loan may be sold on 

the secondary market at a premium or 

a discount to par value. SBA will issue 

guidance regarding any advance 

purchase for loans sold in the secondary 

market. 

e. Can SBA purchase some or all of the 

loan in advance? 

Yes. A lender may request that the 

SBA purchase the expected forgiveness 

amount of a PPP loan or pool of PPP 

loans at the end of week seven of the 

covered period. The expected 

forgiveness amount is the amount of 

loan principal the lender reasonably 

expects the borrower to expend on 

payroll costs, covered mortgage interest, 

covered rent, and covered utility 

payments during the eight week period 

after loan disbursement. At least 75 

percent of the expected forgiveness 

amount shall be for payroll costs, as 

provided in 2.o. To submit a PPP loan 

or pool of PPP loans for advance 

purchase, a lender shall submit a report 

requesting advance purchase with the 

expected forgiveness amount to the 

SBA. The report shall include: the 

Paycheck Protection Program 

Application Form (SBA Form 2483) and 

any supporting documentation 

submitted with such application; the 

Paycheck Protection Program Lender’s 

Application for 7(a) Loan Guaranty 

(SBA Form 2484) and any supporting 

documentation; a detailed narrative 

explaining the assumptions used in 

determining the expected forgiveness 

amount, the basis for those assumptions, 

alternative assumptions considered, and 

why alternative assumptions were not 

used; any information obtained from the 

borrower since the loan was disbursed 

that the lender used to determine the 

expected forgiveness amount, which 

should include the same documentation 

required to apply for loan forgiveness 

such as payroll tax filings, cancelled 

checks, and other payment 

documentation; and any additional 

information the Administrator may 

require to determine whether the 

expected forgiveness amount is 

reasonable. The Administrator, in 

consultation with the Secretary, 

determined that seven weeks is the 

minimum period of time necessary for 

a lender to reasonably determine the 

expected forgiveness amount for a PPP 

loan or pool of PPP loans, since the PPP 

is a new program and the likelihood that 

many borrowers will be new clients of 

the lender. The expected forgiveness 

amount may not exceed the total 

amount of principal on the PPP loan or 

pool of loans. The Administrator will 

purchase the expected forgiveness 

amount of the PPP loan(s) within 15 

days of the date on which the 

Administrator receives a complete 

report that demonstrates that the 

expected forgiveness amount is indeed 

reasonable. 

5. Additional Information 

All loans guaranteed by the SBA 

pursuant to the CARES Act will be 

made consistent with constitutional, 

statutory, and regulatory protections for 

religious liberty, including the First 

Amendment to the Constitution, the 

Religious Freedom Restoration Act, 42 

U.S.C. 2000bb–1 and bb–3, and SBA 

regulation at 13 CFR 113.3–1h, which 

provides that nothing in SBA 

nondiscrimination regulations shall 

apply to a religious corporation, 

association, educational institution or 

society with respect to the membership 

or the employment of individuals of a 

particular religion to perform work 

connected with the carrying on by such 

corporation, association, educational 

institution or society of its religious 

activities. SBA intends to promptly 

issue additional guidance with regard to 

religious liberty protections under this 

program. 

SBA may provide further guidance, if 

needed, through SBA notices and a 

program guide which will be posted on 

SBA’s website at www.sba.gov. 

Questions on the Paycheck Protection 

Program 7(a) Loans 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. 


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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20817 

Compliance With Executive Orders 

12866, 12988, 13132, and 13771, the 

Paperwork Reduction Act (44 U.S.C. 

Ch. 35), and the Regulatory Flexibility 

Act (5 U.S.C. 601–612) 

E.O. 12866 and E.O. 13563 

This interim final rule is 

economically significant for the 

purposes of Executive Orders 12866 and 

13563. 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. 

This rule is necessary to implement 

Sections 1102 and 1106 of the CARES 

Act in order to provide economic relief 

to small businesses nationwide 

adversely impacted under the COVID– 

19 Emergency Declaration. We 

anticipate that this rule will result in 

substantial benefits to small businesses, 

their employees, and the communities 

they serve. However, we lack data to 

estimate the effects of this rule. 

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 impose recordkeeping or reporting 

requirements under the Paperwork 

Reduction Act (‘‘PRA’’). SBA has 

obtained emergency approval under 

OMB Control Number 3245–0407 for the 

information collection (IC) required to 

implement the program described 

above. This IC consists of Form 2483 

(Paycheck Protection Program 

Application Form), SBA Form 2484 

(Paycheck Protection Program Lender’s 

Application for 7(a) Loan Guaranty), 

and SBA Form 3506 (CARES Act 

Section 1102 Lender Agreement), and 

SBA Form 3507 (CARES Act Section 

1102 Lender Agreement—Non-Bank and 

Non-Insured Depository Institution 

Lender). The collection is approved for 

use until September 30, 2020. 

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. Small Business 

Administration’s Office of Advocacy 

guide: How to Comply with the 

Regulatory Flexibility Ac. Ch.1. p.9. 

Accordingly, SBA is not required to 

conduct a regulatory flexibility analysis. 

Authority: 15 U.S.C. 636(a)(36); 

Coronavirus Aid, Relief, and Economic 

Security Act, Public Law 116–136, 

Section 1114. 

Jovita Carranza, 

Administrator. 

[FR Doc. 2020–07672 Filed 4–10–20; 4:15 pm] 

BILLING CODE P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 121 

[Docket No. SBA–2020–0019] 

RIN 3245–AH35 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Interim final rule. 

SUMMARY: Elsewhere in this issue of the 

Federal Register, the U.S. Small 

Business Administration (SBA) is 

publishing an interim final rule (the 

Initial Rule) announcing the 

implementation of sections 1102 and 

1106 of the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act or 

the Act). Section 1102 of the Act 

temporarily adds a new program, titled 

the ‘‘Paycheck Protection Program,’’ to 

the SBA’s 7(a) Loan 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. The 

Paycheck Protection Program and loan 

forgiveness are intended to provide 

economic relief to small businesses 

nationwide adversely impacted by the 

Coronavirus Disease 2019 (COVID–19). 

This interim final rule supplements the 

Initial Rule with additional guidance 

regarding the application of certain 

affiliate rules applicable to SBA’s 

implementation of sections 1102 and 

1106 of the Act and requests public 

comment. 

DATES: 

Effective date: This interim final rule 

is effective April 15, 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. 


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