The Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) guarantees loans from qualified lenders to small businesses impacted by the COVID-19 pandemic so that those businesses can keep workers employed.  In the Third Interim Final Rule issued on April 20, 2020 (see 85 Fed. Reg. 21747), the SBA cleared the way for members of Federal Reserve Banks (“FRB”) and Federal Home Loan Banks (“FHLB”) to pledge PPP loans to secure borrowings by excluding the FRBs and FHLBs from the pledge requirements typically applicable to SBA 7(a) loan pledges.  The exclusion of such pledges from the otherwise applicable requirements means that the SBA does not have to provide prior consent to such pledges nor will it have to approve the FRB and FHLB loan documents or require a multi-party agreement among SBA, the lender, and others.
Continue Reading Federal Reserve Banks and Federal Home Loan Banks May Accept Pledges of PPP Loans as Collateral

On April 2, 2020, the U.S. Small Business Administration (SBA) released its Interim Final Rule[1], which provides further guidance on the Paycheck Protection Program (PPP) as enacted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. On April 2, 2020 the SBA also issued an updated sample application form.

The SBA’s Interim Final Rule clarifies, contradicts and provides additional interpretative guidance related to the CARES Act.  We highlight the following:
Continue Reading Updates on the Paycheck Protection Program under the CARES Act: The SBA’s April 2, 2020 Interim Final Rule