The Small Business Administration (SBA) recently issued an interim final rule that expands the pool of financial institutions eligible to act as lenders under the Paycheck Protection Program (PPP). Eligible PPP lenders now include non-bank and non-insured depository institutions that have an anti-money laundering (AML) program complying with the Bank Secrecy Act (“BSA”) as if a federally regulated institution and meet certain other requirements.
The PPP was created under the recent Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide forgivable loans of up to $10 million to companies that meet certain size requirements, for the primary purpose of covering payroll costs. A detailed overview of the PPP is available here1.
To enhance access to PPP loans, the CARES Act directed the Department of the Treasury and the SBA to establish criteria for allowing financial institutions that do not currently provide SBA loans to act as PPP lenders. These criteria were set out in the new rule.
The expanded group of eligible PPP lenders includes non-FDIC-insured depository institutions and non-depository financing providers (“Non-Bank Lenders”) that have:
- operated since at least February 15, 2019;
- 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;
- implemented a formal compliance program covering matters such as auditing and compliance with applicable law; and
- (a) for institutions currently regulated under the BSA, established the AML compliance procedures required thereby or (b) for all other institutions, established AML compliance procedures equivalent to those of a comparable institution that is federally regulated (which may require the implementation of a customer identification program and protocols for the collection of beneficial ownership information).
Non-Bank Lenders who wish to apply for enrollment as a PPP lender can find the enrollment agreement here (home.treasury.gov/system/files/136/PPP--Agreement-for-New-Lenders-Non-Bank-Non-Insured-Depository-Institution-Lenders-w-seal-fillable_0.pdf). Additional forms and guidance for PPP lenders are available from the SBA here.
For a more detailed discussion of BSA requirements applicable to PPP lenders, please reach out to a member of the White & Case team.
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