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The Thomas Howell Ferguson Blog

Paycheck Protection Program (PPP) Lender Allowed to Apply for a PPP Loan?

Unlike other SBA loan programs, the financial terms for Paycheck Protection Program (PPP) loans are uniform for all borrowers.  The standard underwriting process does not apply because no creditworthiness assessment is required for PPP loans.

Consequently, there is no meaningful risk of underwriting bias or below-market rates and terms.  It has also been recognized that many directors and equity holders of Paycheck Protection Program (PPP) lenders are owners of unrelated businesses.

For those reasons, it has been determined that SBA regulations shall not apply to prohibit an otherwise eligible business owned (in whole or part) by an outside director or holder of a less than 30% equity interest in a Paycheck Protection Program (PPP) lender from obtaining a PPP loan from the PPP lender on whose board the director serves or in which the equity owner holds an interest, provided that the eligible business owned by the director or equity holder follows the same process as any similarly situated customer or account holder of the lender.  Favoritism by the lender in processing time or prioritization of the director’s or equity holder’s PPP application is prohibited.  However, it is cautioned that lenders should comply with all other applicable state and federal regulations concerning loans to associates of the lender.  Lenders should also consult their own internal policies concerning lending to individuals or entities associated with the lender.

It is important to note that the above paragraph does not apply to a director or owner who is also an officer or key employee of the PPP Lender.  Officers and key employees of a Paycheck Protection Payment (PPP) Lender may obtain a PPP loan from a different lender, but not the PPP lender with which they are associated.

The SBA also reminds lenders that the “Authorized Lender Official” for each PPP loan is subject to the limitations described in the Lender Application Form, which states in relevant part: “Neither the undersigned Authorized Lender Official, nor such individual’s spouse or children, has a financial interest in the Applicant [Borrower].”

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