Business Loan Program Temporary Changes; Paycheck Protection Program — Requirements — Promissory Notes, Authorizations, Affiliation, and Eligibility

Record facts

Summary

An interim final rule issued by the U.S. Small Business Administration on Paycheck Protection Program requirements for promissory notes, authorizations, affiliation and eligibility, published in the Federal Register of April 28, 2020 under Docket Number SBA-2020-0021. It states that lenders may use their own promissory note and need no separate SBA Authorization, but must have executed SBA Form 2484. On eligibility, it states that hedge funds and private equity firms are ineligible, that a government-owned hospital is not ineligible if it receives less than 50% of its funding from state or local government sources, and that an applicant in bankruptcy is ineligible. It also states that participation in an employee stock ownership plan does not trigger the affiliation rules, and that a borrower repaying in full by May 7, 2020 is deemed to have made the required certification in good faith.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

23450 
Federal Register / Vol. 85, No. 82 / Tuesday, April 28, 2020 / Rules and Regulations 
SMALL BUSINESS ADMINISTRATION 
[Docket Number SBA–2020–0021] 
13 CFR Parts 120 and 121 
RIN 3245–AH37 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—Requirements—Promissory 
Notes, Authorizations, Affiliation, and 
Eligibility 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: On April 2, 2020, the U.S. 
Small Business Administration (SBA) 
posted an interim final rule (the First 
PPP Interim Final Rule) announcing the 
implementation of the Coronavirus Aid, 
Relief, and Economic Security Act 
(CARES Act or the Act). The Act 
temporarily adds a new program, titled 
the ‘‘Paycheck Protection Program,’’ to 
the SBA’s 7(a) Loan Program. The Act 
also provides for forgiveness of up to the 
full principal amount of qualifying 
loans guaranteed under the Paycheck 
Protection Program (PPP). The PPP is 
intended to provide economic relief to 
small businesses nationwide adversely 
impacted by the Coronavirus Disease 
2019 (COVID–19). SBA posted 
additional interim final rules on April 3, 
2020, and April 14, 2020. This interim 
final rule supplements the previously 
posted interim final rules with 
additional guidance. SBA requests 
public comment on this additional 
guidance. 
DATES: Effective date: This rule is 
effective April 28, 2020. 
Applicability date: This interim final 
rule applies to applications submitted 
under the Paycheck Protection Program 
through June 30, 2020, or until funds 
made available for this purpose are 
exhausted. 
Comment date: Comments must be 
received on or before May 28, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0021 
through the Federal eRulemaking Portal: 
http://www.regulations.gov. Follow the 
instructions for submitting comments. 
SBA will post all comments on 
www.regulations.gov. If you wish to 
submit confidential business 
information (CBI) as defined in the User 
Notice at www.regulations.gov, please 
send an email to ppp-ifr@sba.gov. 
Highlight the information that you 
consider to be CBI and explain why you 
believe SBA should hold this 
information as confidential. SBA will 
review the information and make the 
final determination whether it will 
publish the information. 
FOR FURTHER INFORMATION CONTACT: A 
Call Center Representative at 833–572– 
0502, or the local SBA Field Office; the 
list of offices can be found at https://
www.sba.gov/tools/local-assistance/ 
districtoffices. 
SUPPLEMENTARY INFORMATION: 
I. Background Information 
On March 13, 2020, President Trump 
declared the ongoing Coronavirus 
Disease 2019 (COVID–19) pandemic of 
sufficient severity and magnitude to 
warrant an emergency declaration for all 
States, territories, and the District of 
Columbia. With the COVID–19 
emergency, many small businesses 
nationwide are experiencing economic 
hardship as a direct result of the 
Federal, State, tribal, and local public 
health measures that are being taken to 
minimize the public’s exposure to the 
virus. These measures, some of which 
are government-mandated, are being 
implemented nationwide and include 
the closures of restaurants, bars, and 
gyms. In addition, based on the advice 
of public health officials, other 
measures, such as keeping a safe 
distance from others or even stay-at- 
home orders, are being implemented, 
resulting in a dramatic decrease in 
economic activity as the public avoids 
malls, retail stores, and other 
businesses. 
On March 27, 2020, the President 
signed the Coronavirus Aid, Relief, and 
Economic Security Act (the CARES Act 
or the Act) (Pub. L. 116–136) to provide 
emergency assistance and health care 
response for individuals, families, and 
businesses affected by the coronavirus 
pandemic. The Small Business 
Administration (SBA) received funding 
and authority through the Act to modify 
existing loan programs and establish a 
new loan program to assist small 
businesses nationwide adversely 
impacted by the COVID–19 emergency. 
Section 1102 of the Act temporarily 
permits SBA to guarantee 100 percent of 
7(a) loans under a new program titled 
the ‘‘Paycheck Protection Program.’’ 
Section 1106 of the Act provides for 
forgiveness of up to the full principal 
amount of qualifying loans guaranteed 
under the Paycheck Protection Program. 
II. Comments and Immediate Effective 
Date 
The intent of the Act is that SBA 
provide relief to America’s small 
businesses expeditiously. This intent, 
along with the dramatic decrease in 
economic activity nationwide, provides 
good cause for SBA to dispense with the 
30-day delayed effective date provided 
in the Administrative Procedure Act. 
Specifically, it is critical to meet 
lenders’ and borrowers’ need for clarity 
concerning program requirements as 
rapidly as possible because the last day 
eligible borrowers can apply for and 
receive a loan is June 30, 2020. 
This interim final rule supplements 
previous regulations and guidance on 
several important, discrete issues. The 
immediate effective date of this interim 
final rule will benefit lenders so that 
they can swiftly close and disburse 
loans to small businesses. This interim 
final rule is effective without advance 
notice and public comment because 
section 1114 of the Act authorizes SBA 
to issue regulations to implement Title 
I of the Act without regard to notice 
requirements. This rule is being issued 
to allow for immediate implementation 
of this program. Although this interim 
final rule is effective immediately, 
comments are solicited from interested 
members of the public on all aspects of 
the interim final rule, including section 
III below. These comments must be 
submitted on or before May 28, 2020. 
SBA will consider these comments and 
the need for making any revisions as a 
result of these comments. 
III. Paycheck Protection Program 
Requirements for Promissory Notes, 
Authorizations, Affiliation, and 
Eligibility 
Overview 
The CARES Act was enacted to 
provide immediate assistance to 
individuals, families, and organizations 
affected by the COVID–19 emergency. 
Among the provisions contained in the 
CARES Act are provisions authorizing 
SBA to temporarily guarantee loans 
under the Paycheck Protection Program 
(PPP). Loans under the PPP will be 100 
percent guaranteed by SBA, and the full 
principal amount of the loans and any 
accrued interest may qualify for loan 
forgiveness. Additional information 
about the PPP is available in the First 
PPP Interim Final Rule (85 FR 20811), 
a second interim final rule (85 FR 
20817) (the Second PPP Interim Final 
Rule), and a third interim final rule (the 
Third PPP Interim Final Rule) (85 FR 
21747) (collectively, the PPP Interim 
Final Rules). 
1. Requirements for Promissory Notes 
and Authorizations 
This guidance is substantively 
identical to previously posted FAQ 
guidance. 
a. Are lenders required to use a 
promissory note provided by SBA or 
may they use their own? 
VerDate Sep<11>2014 
16:55 Apr 27, 2020
Jkt 250001
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
E:\FR\FM\28APR1.SGM
28APR1
jbell on DSKJLSW7X2PROD with RULES

23451 
Federal Register / Vol. 85, No. 82 / Tuesday, April 28, 2020 / Rules and Regulations 
1 This requirement is satisfied by a lender when 
the lender completes the process of submitting a 
loan through the E-Tran system; no transmission or 
retention of a physical copy of Form 2484 is 
required. 
2 However, the Act waives the affiliation rules if 
the borrower receives financial assistance from an 
SBA-licensed Small Business Investment Company 
(SBIC) in any amount. This includes any type of 
financing listed in 13 CFR 107.50, such as loans, 
debt with equity features, equity, and guarantees. 
Affiliation is waived even if the borrower has 
investment from other non-SBIC investors. 
Lenders may use their own 
promissory note or an SBA form of 
promissory note. See FAQ 19 (posted 
April 8, 2020). 
b. Are lenders required to use a 
separate SBA Authorization document 
to issue PPP loans? 
No. A lender does not need a separate 
SBA Authorization for SBA to guarantee 
a PPP loan. However, lenders must have 
executed SBA Form 2484 (the Lender 
Application Form—Paycheck Protection 
Program Loan Guaranty) 1 to issue PPP 
loans and receive a loan number for 
each originated PPP loan. Lenders may 
include in their promissory notes for 
PPP loans any terms and conditions, 
including relating to amortization and 
disclosure, that are not inconsistent 
with Sections 1102 and 1106 of the 
CARES Act, the PPP Interim Final Rules 
and guidance, and SBA Form 2484. See 
FAQ 21 (posted April 13, 2020). The 
decision not to require a separate SBA 
Authorization in order to ensure that 
critical PPP loans are disbursed as 
efficiently as practicable. 
2. Clarification Regarding Eligible 
Businesses 
a. Is a hedge fund or private equity 
firm eligible for a PPP loan? 
No. Hedge funds and private equity 
firms are primarily engaged in 
investment or speculation, and such 
businesses are therefore ineligible to 
receive a PPP loan. The Administrator, 
in consultation with the Secretary, does 
not believe that Congress intended for 
these types of businesses, which are 
generally ineligible for section 7(a) loans 
under existing SBA regulations, to 
obtain PPP financing. 
b. Do the SBA affiliation rules 
prohibit a portfolio company of a 
private equity fund from being eligible 
for a PPP loan? 
Borrowers must apply the affiliation 
rules that appear in 13 CFR 121.301(f), 
as set forth in the Second PPP Interim 
Final Rule (85 FR 20817). The affiliation 
rules apply to private equity-owned 
businesses in the same manner as any 
other business subject to outside 
ownership or control.2 However, in 
addition to applying any applicable 
affiliation rules, all borrowers should 
carefully review the required 
certification on the Paycheck Protection 
Program Borrower Application Form 
(SBA Form 2483) stating that ‘‘[c]urrent 
economic uncertainty makes this loan 
request necessary to support the 
ongoing operations of the Applicant.’’ 
c. Is a hospital owned by 
governmental entities eligible for a PPP 
loan? 
A hospital that is otherwise eligible to 
receive a PPP loan as a business concern 
or nonprofit organization (described in 
section 501(c)(3) of the Internal Revenue 
Code of 1986 and exempt from taxation 
under section 501(a) of such Code) shall 
not be rendered ineligible for a PPP loan 
due to ownership by a state or local 
government if the hospital receives less 
than 50% of its funding from state or 
local government sources, exclusive of 
Medicaid. 
The Administrator, in consultation 
with the Secretary, determined that this 
exception to the general ineligibility of 
government-owned entities, 13 CFR 
120.110(j), is appropriate to effectuate 
the purposes of the CARES Act. 
d. Part III.2.b. of the Third PPP 
Interim Final Rule (85 FR 21747, 21751) 
is revised to read as follows: 
Are businesses that receive revenue 
from legal gaming eligible for a PPP 
Loan? 
A business that is otherwise eligible 
for a PPP Loan is not rendered ineligible 
due to its receipt of legal gaming 
revenues, and 13 CFR 120.110(g) is 
inapplicable to PPP loans. Businesses 
that received illegal gaming revenue 
remain categorically ineligible. On 
further consideration, the 
Administrator, in consultation with the 
Secretary, believes this approach is 
more consistent with the policy aim of 
making PPP loans available to a broad 
segment of U.S. businesses. 
3. Business Participation in Employee 
Stock Ownership Plans 
Does participation in an employee 
stock ownership plan (ESOP) trigger 
application of the affiliation rules? 
No. For purposes of the PPP, a 
business’s participation in an ESOP (as 
defined in 15 U.S.C. 632(q)(6)) does not 
result in an affiliation between the 
business and the ESOP. The 
Administrator, in consultation with the 
Secretary, determined that this is 
appropriate given the nature of such 
plans. Under an ESOP, a business 
concern contributes its stock (or money 
to buy its stock or to pay off a loan that 
was used to buy stock) to the plan for 
the benefit of the company’s employees. 
The plan maintains an account for each 
employee participating in the plan. 
Shares of stock vest over time before an 
employee is entitled to them. However, 
with an ESOP, an employee generally 
does not buy or hold the stock directly 
while still employed with the company. 
Instead, the employee generally receives 
the shares in his or her personal account 
only upon the cessation of employment 
with the company, including retirement, 
disability, death, or termination. 
4. Eligibility of Businesses Presently 
Involved in Bankruptcy Proceedings 
Will I be approved for a PPP loan if 
my business is in bankruptcy? 
No. If the applicant or the owner of 
the applicant is the debtor in a 
bankruptcy proceeding, either at the 
time it submits the application or at any 
time before the loan is disbursed, the 
applicant is ineligible to receive a PPP 
loan. If the applicant or the owner of the 
applicant becomes the debtor in a 
bankruptcy proceeding after submitting 
a PPP application but before the loan is 
disbursed, it is the applicant’s 
obligation to notify the lender and 
request cancellation of the application. 
Failure by the applicant to do so will be 
regarded as a use of PPP funds for 
unauthorized purposes. 
The Administrator, in consultation 
with the Secretary, determined that 
providing PPP loans to debtors in 
bankruptcy would present an 
unacceptably high risk of an 
unauthorized use of funds or non- 
repayment of unforgiven loans. In 
addition, the Bankruptcy Code does not 
require any person to make a loan or a 
financial accommodation to a debtor in 
bankruptcy. The Borrower Application 
Form for PPP loans (SBA Form 2483), 
which reflects this restriction in the 
form of a borrower certification, is a 
loan program requirement. Lenders may 
rely on an applicant’s representation 
concerning the applicant’s or an owner 
of the applicant’s involvement in a 
bankruptcy proceeding. 
5. Limited Safe Harbor With Respect to 
Certification Concerning Need for PPP 
Loan Request 
Consistent with section 1102 of the 
CARES Act, the Borrower Application 
Form requires PPP applicants to certify 
that ‘‘[c]urrent economic uncertainty 
makes this loan request necessary to 
support the ongoing operations of the 
Applicant.’’ 
Any borrower that applied for a PPP 
loan prior to the issuance of this 
regulation and repays the loan in full by 
May 7, 2020 will be deemed by SBA to 
have made the required certification in 
good faith. 
The Administrator, in consultation 
with the Secretary, determined that this 
safe harbor is necessary and appropriate 
VerDate Sep<11>2014 
16:55 Apr 27, 2020
Jkt 250001
PO 00000
Frm 00007
Fmt 4700
Sfmt 4700
E:\FR\FM\28APR1.SGM
28APR1
jbell on DSKJLSW7X2PROD with RULES

23452 
Federal Register / Vol. 85, No. 82 / Tuesday, April 28, 2020 / Rules and Regulations 
to ensure that borrowers promptly repay 
PPP loan funds that the borrower 
obtained based on a misunderstanding 
or misapplication of the required 
certification standard. 
6. Additional Information 
SBA may provide further guidance, if 
needed, through SBA notices that will 
be posted on SBA’s website at 
www.sba.gov. Questions on the 
Paycheck Protection Program may be 
directed to the Lender Relations 
Specialist in the local SBA Field Office. 
The local SBA Field Office may be 
found at https://www.sba.gov/tools/ 
local-assistance/districtoffices. 
Compliance With Executive Orders 
12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 
U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601–612) 
Executive Orders 12866, 13563, and 
13771 
This interim final rule is 
economically significant for the 
purposes of Executive Orders 12866 and 
13563, and is considered a major rule 
under the Congressional Review Act. 
SBA, however, is proceeding under the 
emergency provision at Executive Order 
12866 Section 6(a)(3)(D) based on the 
need to move expeditiously to mitigate 
the current economic conditions arising 
from the COVID–19 emergency. This 
rule’s designation under Executive 
Order 13771 will be informed by public 
comment. 
Executive Order 12988 
SBA has drafted this rule, to the 
extent practicable, in accordance with 
the standards set forth in section 3(a) 
and 3(b)(2) of Executive Order 12988, to 
minimize litigation, eliminate 
ambiguity, and reduce burden. The rule 
has no preemptive or retroactive effect. 
Executive Order 13132 
SBA has determined that this rule 
will not have substantial direct effects 
on the States, on the relationship 
between the National Government and 
the States, or on the distribution of 
power and responsibilities among the 
various layers of government. Therefore, 
SBA has determined that this rule has 
no federalism implications warranting 
preparation of a federalism assessment. 
Paperwork Reduction Act, 44 U.S.C. 
Chapter 35 
SBA has determined that this rule 
will not impose new or modify existing 
recordkeeping or reporting requirements 
under the Paperwork Reduction Act. 
Regulatory Flexibility Act (RFA) 
The Regulatory Flexibility Act (RFA) 
generally requires that when an agency 
issues a proposed rule, or a final rule 
pursuant to section 553(b) of the APA or 
another law, the agency must prepare a 
regulatory flexibility analysis that meets 
the requirements of the RFA and 
publish such analysis in the Federal 
Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for such small government jurisdictions, 
neither State nor local governments are 
‘‘small entities.’’ Similarly, for purposes 
of the RFA, individual persons are not 
small entities. The requirement to 
conduct a regulatory impact analysis 
does not apply if the head of the agency 
‘‘certifies that the rule will not, if 
promulgated, have a significant 
economic impact on a substantial 
number of small entities.’’ 5 U.S.C. 
605(b). The agency must, however, 
publish the certification in the Federal 
Register at the time of publication of the 
rule, ‘‘along with a statement providing 
the factual basis for such certification.’’ 
If the agency head has not waived the 
requirements for a regulatory flexibility 
analysis in accordance with the RFA’s 
waiver provision, and no other RFA 
exception applies, the agency must 
prepare the regulatory flexibility 
analysis and publish it in the Federal 
Register at the time of promulgation or, 
if the rule is promulgated in response to 
an emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). Rules that are 
exempt from notice and comment are 
also exempt from the RFA requirements, 
including conducting a regulatory 
flexibility analysis, when among other 
things the agency for good cause finds 
that notice and public procedure are 
impracticable, unnecessary, or contrary 
to the public interest. SBA Office of 
Advocacy guide: How to Comply with 
the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA is not required to 
conduct a regulatory flexibility analysis. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–09098 Filed 4–27–20; 8:45 am] 
BILLING CODE P 
DEPARTMENT OF TRANSPORTATION 
Federal Aviation Administration 
14 CFR Part 39 
[Docket No. FAA–2020–0095; Product 
Identifier 2019–NM–192–AD; Amendment 
39–19904; AD 2020–08–12] 
RIN 2120–AA64 
Airworthiness Directives; The Boeing 
Company Airplanes 
AGENCY: Federal Aviation 
Administration (FAA), DOT. 
ACTION: Final rule. 
SUMMARY: The FAA is adopting a new 
airworthiness directive (AD) for certain 
The Boeing Company Model 747–8 and 
747–8F series airplanes. This AD was 
prompted by an evaluation by the 
design approval holder (DAH) 
indicating that the skin lap joints at 
certain stringers are subject to 
widespread fatigue damage (WFD). This 
AD requires modifying the left and right 
side lap joints of the fuselage skin, 
repetitive post-modification inspections 
for cracking, and applicable on- 
condition actions. The FAA is issuing 
this AD to address the unsafe condition 
on these products. 
DATES: This AD is effective June 2, 2020. 
The Director of the Federal Register 
approved the incorporation by reference 
of a certain publication listed in this AD 
as of June 2, 2020. 
ADDRESSES: For service information 
identified in this final rule, contact 
Boeing Commercial Airplanes, 
Attention: Contractual & Data Services 
(C&DS), 2600 Westminster Blvd., MC 
110–SK57, Seal Beach, CA 90740–5600; 
telephone 562–797–1717; internet 
https://www.myboeingfleet.com. You 
may view this service information at the 
FAA, Airworthiness Products Section, 
Operational Safety Branch, 2200 South 
216th St., Des Moines, WA. For 
information on the availability of this 
material at the FAA, call 206–231–3195. 
It is also available on the internet at 
https://www.regulations.gov by 
searching for and locating Docket No. 
FAA–2020–0095. 
Examining the AD Docket 
You may examine the AD docket on 
the internet at https:// 
VerDate Sep<11>2014 
16:55 Apr 27, 2020
Jkt 250001
PO 00000
Frm 00008
Fmt 4700
Sfmt 4700
E:\FR\FM\28APR1.SGM
28APR1
jbell on DSKJLSW7X2PROD with RULES

File and source

File

2020-04-28_2020-09098.pdf

Size

185,104 bytes

SHA-256

a29dc0950526749ba7961dd14115b45f9247228529229b3a2f0942d4f0ddb385

Our copy

2020-04-28_2020-09098.pdf

Original

www.federalregister.gov