One key aspect of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is the Paycheck Protection Program (PPP), generated many questions last week as credit unions worked to understand how they could participate in the program. The CARES Act and implementing pieces for this program are rather technical, so this blog has a very high-level overview of some of the issues that came up last week, and a round up of resources for credit unions seeking more information.
The CARES Act provided the Small Business Administration (SBA) with funds and authority to modify existing loan programs to establish a new loan program, the PPP, to assist small businesses adversely impacted by COVID-19. Section 1102 of the CARES Act provides the details of the new lending program, and section 1106 provides forgiveness provisions up to the full principal amount of qualifying loans under the PPP. Late last week, the SBA published an interim final rule implementing section 1102 and 1106.
Federally insured credit unions can offer PPP loans to their members, if the credit union is an SBA 7(a) authorized lender. Existing 7(a) lenders were automatically approved to make PPP loans, and the SBA can authorize additional lenders to participate in the program. However, a credit union cannot participate if it is in troubled condition or subject to formal enforcement action with NCUA. If a credit union is not an existing 7(a) lender, the CARES Act allowed the SBA to create a designation specifically for the PPP loans. The SBA published an application for lenders that would like to participate in the program but are not already 7(a) lenders which can be submitted to DelegatedAuthority@sba.gov. Lenders then use the SBA’s eTRAN system.
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