April 01, 2020

All FICUs can lend under new SBA program, says guidance

small businessThe Treasury Department and Small Business Administration have released information for the $349 billion paycheck protection program included in the Phase 3 coronavirus relief package. Treasury-issued guidance for lenders heeds NAFCU President and CEO Dan Berger's request that all federally-insured credit unions (FICUs) be allowed to offer loans under the program.

Small businesses may begin applying for paycheck protection loans Friday; independent contractors, self-employed individuals, and sole proprietors can begin applying April 10. The maximum loan amount is $10 million with an interest rate of 0.5 percent, first payment deferred for six months, and maturity of two years. Additional information on the loan terms and conditions is available here.

The CARES Act directed the Treasury Department to work with the SBA to quickly establish criteria for "insured credit unions" allowed to participate in the program.

According to the paycheck protection program's information sheet for lenders, "[a]ll federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions are eligible to participate in this program."

While institutions that are currently SBA-approved lenders "will be given delegated authority to speedily process" loans under the paycheck protection program, "[a] broad set of additional lenders can begin making loans as soon as they are approved and enrolled in the program. New lenders will need to submit their application to to apply with the SBA."

The SBA, in a release, said its goal "is to position lenders as the single point-of-contact for small businesses – the application, loan processing, and disbursement of funds will all be administered at the community level." Loans will be available retroactive from Feb. 15, 2020 so employers can rehire their recently laid-off employees through June 30, 2020. NAFCU expect further guidance will be provided.

The loans are guaranteed by the SBA and related fees will be waived. Additional information on underwriting requirements, lender compensation, agent compensation, and ability to sell in the secondary market is available in the fact sheet.

In addition to the lender fact sheet, there is one for borrowers and a borrower application. A topline overview of the program is also available; additional information for the paycheck protection program and other coronavirus-related small business assistance can be found on the SBA's website. The Treasury Department also has more information on its coronavirus-related efforts available here.

All of NAFCU's coronavirus resources can be found here; there are resources specific to regulator actions, and the Phase 2 and Phase 3 relief packages. Contact NAFCU's Compliance Team with any compliance-related questions or concerns; NAFCU's Compliance Blog is also publishing daily, Monday-Friday, with important developments.