The Small Business Administration recently released another interim final rule. This rule relates to disbursements of Paycheck Protection Program loans. It announces that borrowers may not take multiple draws to delay the start of the 8-week covered period. Under the CARES Act, the covered period is important for determining loan forgiveness.
The Paycheck Protection Program FAQs had created confusion. The answer to Question 20 says that the 8‑week covered period “begins on the date the lender makes the first disbursement.” “First disbursement” implied that there could be a second or third disbursement.
Under the new rule, that isn’t true. Because the overarching goal is “payroll continuity for employees,” one, full disbursement must be made within 10 calendar days of loan approval-that is, within 10 days after the Small Business Administration assigns a loan number. If the tenth calendar day falls on a weekend or legal holiday, full disbursement must occur by the end of the next business day. For loans that were partially disbursed before this rule was announced, full disbursement must occur by May 8, 2020, and the 8‑week covered period began on the date of the first partial disbursement.
The guidance also states that a new Form 1502 for lender reporting will be provided. Lenders will use Forms 1502 to collect processing fees on fully disbursed loans. Lenders must electronically report within 20 days after loan approval, or for loans previously approved, by May 18, 2020. For legal advice specific to the operation of your Minnesota business, please contact us at Dunlap Seeger.