Business Loan Program Temporary Changes; Paycheck Protection Program — SBA Loan Review Procedures and Related Borrower and Lender Responsibilities

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Summary

An interim final rule of the U.S. Small Business Administration, Business Loan Program Temporary Changes; Paycheck Protection Program—SBA Loan Review Procedures and Related Borrower and Lender Responsibilities, 13 CFR Part 120, Docket Number SBA-2020-0033, RIN 3245-AH47, published in the Federal Register of June 1, 2020. The rule supplements previously posted interim final rules implementing the CARES Act, Pub. L. 116-136, in order to inform borrowers and lenders of the agency’s process for reviewing PPP loan applications and loan forgiveness applications. It is effective May 28, 2020, applies to loan and loan forgiveness applications submitted under the program, and sets a comment date of July 1, 2020. It states that section 1114 of the CARES Act permits issuance without advance notice and comment, and notes an interim final rule on loan forgiveness posted on May 22, 2020.

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33010 
Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 
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 impose a new reporting 
requirement on borrowers who request 
forgiveness of their PPP loan. SBA has 
developed Form 3508, Paycheck 
Protection Program—Loan Forgiveness 
Application, for use in collecting the 
information required to determine 
whether a borrower is eligible for loan 
forgiveness. SBA obtained approval of 
Form 3508 from the Office of 
Management and Budget (OMB) as a 
modification to the existing PPP 
collection of information (OMB Control 
Number (3245–0407). This collection of 
information was approved under 
emergency procedures to facilitate 
immediate implementation of the PPP 
and expires on October 31, 2020. 
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 Small Business 
Administration. 
Michael Faulkender, 
Assistant Secretary for Economic Policy, 
Department of the Treasury. 
[FR Doc. 2020–11536 Filed 5–28–20; 8:45 am] 
BILLING CODE 8026–03–P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 120 
[Docket Number SBA–2020–0033] 
RIN 3245–AH47 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—SBA Loan Review 
Procedures and Related Borrower and 
Lender Responsibilities 
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 announcing 
the implementation of the Coronavirus 
Aid, Relief, and Economic Security Act 
(CARES Act). The CARES Act 
temporarily adds a new program, titled 
the ‘‘Paycheck Protection Program,’’ to 
the SBA’s 7(a) Loan Program. The 
CARES 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, April 14, 2020, April 24, 2020, 
April 28, 2020, April 30, 2020, May 5, 
2020, May 8, 2020, May 13, 2020, May 
14, 2020, May 18, 2020, and May 20, 
2020, and the Department of the 
Treasury (Treasury) posted an 
additional interim final rule on April 
27, 2020. SBA and Treasury posted an 
interim final rule on Loan Forgiveness 
contemporaneously with this interim 
final rule on May 22, 2020. This interim 
final rule supplements the previously 
posted interim final rules in order to 
inform borrowers and lenders of SBA’s 
process for reviewing PPP loan 
applications and loan forgiveness 
applications, and requests public 
comment. 
DATES:
Effective date: This rule is effective 
May 28, 2020. 
Applicability date: This interim final 
rule applies to loan applications and 
loan forgiveness applications submitted 
under the Paycheck Protection Program. 
Comment date: Comments must be 
received on or before July 1, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0033 
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 
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33011 
Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 
1 https://www.sba.gov/document/support-faq- 
lenders-borrowers. 
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) 
(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 CARES 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 CARES 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 CARES 
Act provides for forgiveness of up to the 
full principal amount of qualifying 
loans guaranteed under the Paycheck 
Protection Program, and requires SBA to 
issue guidance and regulations 
implementing section 1106 within 30 
days after the date of enactment of the 
CARES Act. On April 2, 2020, SBA 
posted its first PPP interim final rule (85 
FR 20811) (the First Interim Final Rule) 
covering in part loan forgiveness. On 
April 8, 2020 and on April 26, 2020, 
SBA posted Frequently Asked 
Questions on loan forgiveness.1 On 
April 14, 2020, SBA posted another PPP 
interim final rule (85 FR 21747) 
covering in part loan forgiveness. On 
April 24, 2020, the President signed the 
Paycheck Protection Program and 
Health Care Enhancement Act (Pub. L. 
116–139), which provided additional 
funding and authority for the Paycheck 
Protection Program. 
As described below, this interim final 
rule informs borrowers and lenders of 
SBA’s process for reviewing PPP loan 
applications and loan forgiveness 
applications. This interim final rule 
supplements the interim final rule on 
Loan Forgiveness posted 
contemporaneously with this interim 
final rule. 
II. Comments and Immediate Effective 
Date 
The intent of the CARES 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 loan forgiveness 
requirements as rapidly as possible 
because borrowers can seek loan 
forgiveness as early as eight-weeks 
following the date of disbursement of 
their PPP loans. Because the first PPP 
loans were disbursed after April 3, 
providing borrowers with certainty on 
SBA’s process for reviewing PPP loan 
applications and loan forgiveness 
applications will enhance borrowers’ 
ability to determine whether, and to 
what extent, they should apply for PPP 
loans and loan forgiveness, and thereby 
carry out the purposes of the CARES Act 
in keeping their workers employed and 
paid, while at the same time taking 
necessary steps to maximize eligible 
loan forgiveness amounts. An 
immediate effective date also is 
necessary for PPP lenders who generally 
will make the loan forgiveness 
determinations, as provided in the 
CARES Act. Specifically, an immediate 
effective date is necessary for lenders so 
that they will have both a degree of 
certainty and sufficient time to develop 
their systems and policies and 
procedures in order to timely process 
loan forgiveness applications. 
This interim final rule supplements 
previous regulations and guidance on 
the discrete issues related to SBA’s 
process for review of PPP loan 
applications and loan forgiveness 
applications. This interim final rule is 
effective without advance notice and 
public comment because section 1114 of 
the CARES Act authorizes SBA to issue 
regulations to implement Title I of the 
CARES Act without regard to notice 
requirements. In addition, SBA has 
determined that there is good cause for 
dispensing with advance public notice 
and comment on the ground that it 
would be contrary to the public interest. 
Specifically, SBA has determined that 
advance notice and public comment 
would delay the ability of PPP 
borrowers to understand with certainty 
SBA’s process for reviewing PPP loan 
applications and loan forgiveness 
applications. By providing a high degree 
of certainty to PPP borrowers through 
this interim final rule, PPP borrowers 
will be able to take immediate steps to 
maximize their loan forgiveness 
amounts. This rule is being issued to 
allow for immediate implementation of 
the forgiveness component of this 
program. Although this interim final 
rule is effective immediately, comments 
are solicited from interested members of 
the public on all aspects of this interim 
final rule, including section III below. 
These comments must be submitted on 
or before July 1, 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 SBA Loan Review 
Procedures and Related Borrower and 
Lender Responsibilities 
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 may 
qualify for loan forgiveness. Additional 
information about the PPP is available 
in interim final rules published by SBA 
and Treasury in the Federal Register (85 
FR 20811, 85 FR 20817, 85 FR 21747, 
85 FR 23450, 85 FR 23917, 85 FR 26321, 
85 FR 26324, 85 FR 27287, 85 FR 29842, 
85 FR 29845, 85 FR 29847, 85 FR 
30835), as well as an SBA interim final 
rule posted on May 20, 2020 and an 
SBA and Treasury interim final rule 
posted on May 22, 2020 (collectively, 
the PPP Interim Final Rules). 
Under the CARES Act, SBA is 
authorized to guarantee loans under the 
PPP, a new temporary 7(a) program, 
through June 30, 2020. The intent of the 
Act is that SBA provide relief to 
America’s small businesses 
expeditiously, which is expressed in the 
Act by giving all lenders delegated 
authority and streamlining the 
requirements of the regular 7(a) loan 
program. 
The Small Business Act authorizes 
the Administrator to conduct 
investigations to determine whether a 
recipient or participant in any 
assistance under a 7(a) program, 
including the PPP, is ineligible for a 
loan, or has violated section 7(a), or any 
rule, regulation or order issued 
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33012 
Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 
2 This interim final rule is an exercise of SBA’s 
rulemaking authority under 15 U.S.C. 634(b), 15 
U.S.C. 633(d), and 5 U.S.C. App., Reorg. Plan No. 
4 of 1965, 11(b), 13(a) (abolishing Loan Policy 
Board and transferring functions to the 
Administrator); and CARES Act sections 1106(k) 
and 1114. 
3 https://www.sba.gov/document/support—faq- 
lenders-borrowers. 
thereunder. 15 U.S.C. 634(b)(11). 
Additionally, under section 7(a), the 
Administrator is empowered to make 
loans in cooperation with lenders 
through agreements to participate on a 
deferred (guaranteed) basis. 15 U.S.C. 
636(a). Further, the Administrator may 
make such rules and regulations as 
deemed necessary and take any and all 
actions determined to be necessary or 
desirable with respect to 7(a) loans. 15 
U.S.C. 634(b)(6) and (b)(7). Pursuant to 
these provisions of the Small Business 
Act, SBA has issued regulations 
establishing the standards by which it 
will investigate whether a loan met 
program requirements and the 
circumstances under which SBA will be 
released from liability on a guarantee for 
such a loan. 13 CFR 120.524. 
In light of the structure of the PPP 
program established by the CARES Act 
and the PPP Interim Final Rules, in 
which loans and loan forgiveness are 
provided based on the borrower’s 
certifications and documentation 
provided by the borrower, the 
Administrator, in consultation with the 
Secretary of the Treasury (Secretary), 
has determined that it is appropriate to 
adopt additional procedures and criteria 
through which SBA will review whether 
an action by the borrower has resulted 
in its receipt of a PPP loan that did not 
meet program requirements.2 SBA’s 
review of borrower certifications and 
representations regarding the borrower’s 
eligibility for a PPP loan and loan 
forgiveness, and the borrower’s use of 
PPP loan proceeds, is essential to ensure 
that PPP loans are directed to the 
entities Congress intended, and that PPP 
loan proceeds are used for the purposes 
Congress required, including the CARES 
Act’s central purpose of keeping 
workers paid and employed. 
1. SBA Reviews of Individual PPP Loans 
a. Will SBA review individual PPP 
loans? 
Yes. SBA may review any PPP loan, 
as the Administrator deems appropriate, 
as described below. 
b. What borrower representations and 
statements will SBA review? 
The Administrator is authorized to 
review the following: 
Borrower Eligibility: The 
Administrator may review whether a 
borrower is eligible for the PPP loan 
based on the provisions of the CARES 
Act, the rules and guidance available at 
the time of the borrower’s PPP loan 
application, and the terms of the 
borrower’s loan application. See FAQ 17 
(posted April 6, 2020).3 These include, 
but are not limited to, SBA’s regulations 
under 13 CFR 120.110 (as modified and 
clarified by the PPP Interim Final Rules) 
and 13 CFR 121.301(f) and the 
information, certifications, and 
representations on the Borrower 
Application Form (SBA Form 2483 or 
lender’s equivalent form) and Loan 
Forgiveness Application Form (SBA 
Form 3508 or lender’s equivalent form). 
Loan Amounts and Use of Proceeds: 
The Administrator may review whether 
a borrower calculated the loan amount 
correctly and used loan proceeds for the 
allowable uses specified in the CARES 
Act. 
Loan Forgiveness Amounts: CThe 
Administrator may review whether a 
borrower is entitled to loan forgiveness 
in the amount claimed on the 
borrower’s Loan Forgiveness 
Application (SBA Form 3508 or lender’s 
equivalent form). 
c. When will SBA undertake a loan 
review? 
For a PPP loan of any size, SBA may 
undertake a review at any time in SBA’s 
discretion. For example, SBA may 
review a loan if the loan documentation 
submitted to SBA by the lender or any 
other information indicates that the 
borrower may be ineligible for a PPP 
loan, or may be ineligible to receive the 
loan amount or loan forgiveness amount 
claimed by the borrower. 13 CFR 
120.524(c). As noted on the Loan 
Forgiveness Application Form, the 
borrower must retain PPP 
documentation in its files for six years 
after the date the loan is forgiven or 
repaid in full, and permit authorized 
representatives of SBA, including 
representatives of its Office of Inspector 
General, to access such files upon 
request. 
Lenders must comply with applicable 
SBA requirements for records retention, 
which for Federally regulated lenders 
means compliance with the 
requirements of their federal financial 
institution regulator and for SBA 
supervised lenders (as defined in 13 
CFR 120.10 and including PPP lenders 
with authority under SBA Form 3507) 
means compliance with 13 CFR 
120.461. 
d. Will I have the opportunity to 
respond to SBA’s questions in a review? 
Yes. If loan documentation submitted 
to SBA by the lender or any other 
information indicates that the borrower 
may be ineligible for a PPP loan or may 
be ineligible to receive the loan amount 
or loan forgiveness amount claimed by 
the borrower, SBA will require the 
lender to contact the borrower in 
writing to request additional 
information. SBA may also request 
information directly from the borrower. 
The lender will provide any additional 
information provided to it by the 
borrower to SBA. SBA will consider all 
information provided by the borrower in 
response to such an inquiry. 
Failure to respond to SBA’s inquiry 
may result in a determination that the 
borrower was ineligible for a PPP loan 
or ineligible to receive the loan amount 
or loan forgiveness amount claimed by 
the borrower. 
e. If SBA determines that a borrower is 
ineligible for a PPP loan, can the loan 
be forgiven? 
No. If SBA determines that a borrower 
is ineligible for the PPP loan, SBA will 
direct the lender to deny the loan 
forgiveness application. Further, if SBA 
determines that the borrower is 
ineligible for the loan amount or loan 
forgiveness amount claimed by the 
borrower, SBA will direct the lender to 
deny the loan forgiveness application in 
whole or in part, as appropriate. SBA 
may also seek repayment of the 
outstanding PPP loan balance or pursue 
other available remedies. 
Section 1106(b) of the CARES Act 
provides for forgiveness of a PPP loan 
only if the borrower is an ‘‘eligible 
recipient.’’ The Administrator has 
determined that to be an eligible 
recipient that is entitled to forgiveness 
under section 1106(b), the borrower 
must be an ‘‘eligible recipient’’ under 15 
U.S.C. 636(a)(36)(A)(iv) and rules and 
guidance available at the time of the 
borrower’s loan application. This 
requirement promotes the public 
interest, aligns SBA’s functions with 
other governmental policies, and 
appropriately carries out the CARES 
Act’s PPP provisions, including by 
preventing evasion of the requirements 
for PPP loan eligibility and ensuring 
program integrity with respect to this 
emergency financial assistance program. 
It is also consistent with the CARES 
Act’s nonrecourse provision, 15 U.S.C. 
636(a)(36)(F)(v), which limits SBA’s 
recourse against individual 
shareholders, members, or partners of a 
PPP borrower for nonpayment of a PPP 
loan only if the borrower is an eligible 
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33013 
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4 85 FR 20811, 20815–20816 (April 15, 2020). 
recipient of the loan. Accordingly, the 
PPP Loan Forgiveness Application (SBA 
Form 3508 or lender’s equivalent form) 
notes that SBA may direct a lender to 
disapprove a borrower’s loan 
forgiveness application if SBA 
determines that the borrower does not 
qualify as an eligible recipient for the 
PPP loan. 
f. May a borrower appeal SBA’s 
determination that the borrower is 
ineligible for a PPP loan or ineligible for 
the loan amount or the loan forgiveness 
amount claimed by the borrower? 
Yes. SBA intends to issue a separate 
interim final rule addressing this 
process. 
2. The Loan Forgiveness Process for 
Lenders 
a. What should a lender review? 
For all PPP Loan Forgiveness 
Applications, each lender shall: 
i. Confirm receipt of the borrower 
certifications contained in the Loan 
Forgiveness Application Form. 
ii. Confirm receipt of the 
documentation borrowers must submit 
to aid in verifying payroll and 
nonpayroll costs, as specified in the 
instructions to the Loan Forgiveness 
Application Form. 
iii. Confirm the borrower’s 
calculations on the borrower’s Loan 
Forgiveness Application, including the 
dollar amount of the (A) Cash 
Compensation, Non-Cash 
Compensation, and Compensation to 
Owners claimed on Lines 1, 4, 6, 7, 8, 
and 9 on PPP Schedule A and (B) 
Business Mortgage Interest Payments, 
Business Rent or Lease Payments, and 
Business Utility Payments claimed on 
Lines 2, 3, and 4 on the PPP Loan 
Forgiveness Calculation Form, by 
reviewing the documentation submitted 
with the Loan Forgiveness Application. 
iv. Confirm that the borrower made 
the calculation on Line 10 of the Loan 
Forgiveness Calculation Form correctly, 
by dividing the borrower’s Eligible 
Payroll Costs claimed on Line 1 by 0.75. 
Providing an accurate calculation of 
the loan forgiveness amount is the 
responsibility of the borrower, and the 
borrower attests to the accuracy of its 
reported information and calculations 
on the Loan Forgiveness Application. 
Lenders are expected to perform a good- 
faith review, in a reasonable time, of the 
borrower’s calculations and supporting 
documents concerning amounts eligible 
for loan forgiveness. For example, 
minimal review of calculations based on 
a payroll report by a recognized third- 
party payroll processor would be 
reasonable. By contrast, if payroll costs 
are not documented with such 
recognized sources, more extensive 
review of calculations and data would 
be appropriate. The borrower shall not 
receive forgiveness without submitting 
all required documentation to the 
lender. 
As the First Interim Final Rule 4 
indicates, lenders may rely on borrower 
representations. If the lender identifies 
errors in the borrower’s calculation or 
material lack of substantiation in the 
borrower’s supporting documents, the 
lender should work with the borrower 
to remedy the issue. As stated in 
paragraph III.3.c of the First Interim 
Final Rule, the lender does not need to 
independently verify the borrower’s 
reported information if the borrower 
submits documentation supporting its 
request for loan forgiveness and attests 
that it accurately verified the payments 
for eligible costs. 
b. What is the timeline for the lender’s 
decision on a loan forgiveness 
application? 
The lender must issue a decision to 
SBA on a loan forgiveness application 
not later than 60 days after receipt of a 
complete loan forgiveness application 
from the borrower. That decision may 
take the form of an approval (in whole 
or in part); denial; or (if directed by 
SBA) a denial without prejudice due to 
a pending SBA review of the loan for 
which forgiveness is sought. In the case 
of a denial without prejudice, the 
borrower may subsequently request that 
the lender reconsider its application for 
loan forgiveness, unless SBA has 
determined that the borrower is 
ineligible for a PPP loan. The 
Administrator has determined that this 
process appropriately balances the need 
for efficient processing of loan 
forgiveness applications with 
considerations of program integrity, 
including affording SBA the 
opportunity to ensure that borrower 
representations and certifications 
(including concerning eligibility for a 
PPP loan) were accurate. 
When the lender issues its decision to 
SBA approving the application (in 
whole or in part), it must include (1) the 
PPP Loan Forgiveness Calculation Form; 
(2) PPP Schedule A; and (3) the 
(optional) PPP Borrower Demographic 
Information Form (if submitted to the 
lender). The lender must confirm that 
the information provided by the lender 
to SBA accurately reflects lender’s 
records for the loan, and that the lender 
has made its decision in accordance 
with the requirements set forth in 2.a. If 
the lender determines that the borrower 
is entitled to forgiveness of some or all 
of the amount applied for under the 
statute and applicable regulations, the 
lender must request payment from SBA 
at the time the lender issues its decision 
to SBA. SBA will, subject to any SBA 
review of the loan or loan application, 
remit the appropriate forgiveness 
amount to the lender, plus any interest 
accrued through the date of payment, 
not later than 90 days after the lender 
issues its decision to SBA. If applicable, 
SBA will deduct EIDL Advance 
Amounts from the forgiveness amount 
remitted to the Lender as required by 
section 1110(e)(6) of the CARES Act. 
When the lender issues its decision to 
SBA determining that the borrower is 
not entitled to forgiveness in any 
amount, the lender must provide SBA 
with the reason for its denial, together 
with (1) the PPP Loan Forgiveness 
Calculation Form; (2) PPP Schedule A; 
and (3) the (optional) PPP Borrower 
Demographic Information Form (if 
submitted to the lender). The lender 
must confirm that the information 
provided by the lender to SBA 
accurately reflects lender’s records for 
the loan, and that the lender has made 
its decision in accordance with the 
requirements set forth in 2.a. The lender 
must also notify the borrower in writing 
that the lender has issued a decision to 
SBA denying the loan forgiveness 
application. SBA reserves the right to 
review the lender’s decision in its sole 
discretion. Within 30 days of notice 
from the lender, a borrower may request 
that SBA review the lender’s decision 
by reviewing the loan in accordance 
with 2.c. below. 
Enabling SBA to use the statutory 90- 
day period to review the PPP loan and 
forgiveness documentation is an 
appropriate procedural protection to 
prevent fraud or misuse of PPP funds, 
ensure that recipients of PPP loans are 
within the scope of entities that the 
CARES Act is intended to assist, and 
confirm compliance with the PPP 
requirements set forth in the statute, 
rules, and guidance. This protection is 
also important in light of the large 
number and diverse types of PPP 
lenders, many of which were not 
previously SBA participating lenders 
and which were approved rapidly in 
order to enable financial assistance to be 
provided as rapidly as feasible to 
millions of small businesses. SBA will 
use the 90-day period to help ensure 
that applicable legal requirements have 
been satisfied. 
SBA will issue additional procedures 
on the process for advance purchase of 
PPP loans. 
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Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 
c. What should a lender do if it receives 
notice that SBA is reviewing a loan? 
SBA may begin a review of any PPP 
loan of any size at any time in SBA’s 
discretion. If SBA undertakes such a 
review, SBA will notify the lender in 
writing and the lender must notify the 
borrower in writing within five business 
days of receipt. 
Within five business days of receipt of 
such notice, the lender shall transmit to 
SBA electronic copies of the following: 
i. The Borrower Application Form 
(SBA Form 2483 or lender’s equivalent 
form) and all supporting documentation 
provided by the borrower. 
ii. The Loan Forgiveness Application 
(SBA Form 3508 or lender’s equivalent 
form), and all supporting 
documentation provided by the 
borrower (if the lender has received 
such application). If the lender receives 
such application after it receives notice 
that SBA has commenced a loan review, 
the lender shall transmit electronic 
copies of the application and all 
supporting documentation provided by 
the borrower to SBA within five 
business days of receipt. The lender 
must also request that the borrower 
provide the lender with a copy of the 
Schedule A Worksheet to the Loan 
Forgiveness Application, and the lender 
must submit the worksheet to SBA 
within 5 business days of receipt from 
the borrower. 
iii. A signed and certified transcript of 
account. 
iv. A copy of the executed note 
evidencing the PPP loan. 
v. Any other documents related to the 
loan requested by SBA. 
If SBA has notified the lender that 
SBA has commenced a loan review, the 
lender shall not approve any application 
for loan forgiveness for such loan until 
SBA notifies the lender in writing that 
SBA has completed its review. 
3. Lender Fees 
a. Is the lender eligible for a processing 
fee if SBA determines that a borrower is 
ineligible? 
No. If SBA conducts a loan review 
and determines that the borrower was 
ineligible for a PPP loan, the lender is 
not eligible for a processing fee. 
b. Are lender processing fees subject to 
clawback if SBA determines that a 
borrower is ineligible? 
Yes. For any SBA-reviewed PPP loan, 
if within one year after the loan was 
disbursed SBA determines that a 
borrower was ineligible for a PPP loan 
based on the provisions of the CARES 
Act or applicable rules or guidance 
available at the time of the borrower’s 
loan application, or the terms of the 
loan application, SBA will seek 
repayment of the lender processing fee 
from the lender. However, SBA’s 
determination of borrower eligibility 
will have no effect on SBA’s guaranty of 
the loan if the lender has complied with 
its obligations under section III.3.b of 
the First Interim Final Rule and the 
document collection and retention 
requirements described in the lender 
application form (SBA Form 2484). 
c. Are lender processing fees subject to 
clawback if a lender has not fulfilled its 
obligations under PPP regulations? 
Yes. If a lender fails to satisfy the 
requirements applicable to lenders that 
are set forth in section III.3.b of the First 
Interim Final Rule or the document 
collection and retention requirements 
described in the lender application form 
(SBA Form 2484), SBA will seek 
repayment of the lender processing fee 
from the lender and may determine that 
the loan is not eligible for a guaranty. 
4. 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 impose a new reporting 
requirement on the lenders that are 
participating in the PPP. As discussed 
above, when a lender approves or 
denies a request for loan forgiveness, the 
lender must submit to SBA limited 
information from the borrower’s Loan 
Forgiveness Application (SBA Form 
3508 or lender’s equivalent form), 
including the portion of the form used 
to calculate the total amount to be 
forgiven, as well as the schedule used to 
determine the borrower’s payroll 
expenses. In addition, for those loans 
that SBA selects for review, the 
applicable lenders will be required to 
submit information to allow SBA to 
review the loans for borrower eligibility, 
loan amount eligibility, and loan 
forgiveness eligibility. SBA will submit 
the new reporting requirements to OMB 
for approval as a modification to the 
existing PPP information collection. 
This information collection is currently 
approved as an emergency request 
under OMB Control Number 3245–0407 
until October 31, 2020. 
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 
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33015 
Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 
1 ASTM F963 is a consumer product safety 
standard, except for section 4.2 and Annex 4, or any 
provision that restates or incorporates an existing 
mandatory standard or ban promulgated by the 
Commission or by statute. 
2 The Commission is not incorporating ASTM 
F963 by reference into part 1253. 
3 ASTM F963 contains the following note 
regarding the scope of the solubility requirement: 
NOTE 4—For the purposes of this requirement, the 
following criteria are considered reasonably 
appropriate for the classification of children’s toys 
or parts likely to be sucked, mouthed or ingested: 
(1) All toy parts intended to be mouthed or contact 
food or drink, components of children’s toys which 
are cosmetics, and components of writing 
instruments categorized as children’s toys; (2) 
Children’s toys intended for children less than 6 
years of age, that is, all accessible parts and 
components where there is a probability that those 
parts and components may come into contact with 
the mouth. 
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. 2020–11533 Filed 5–28–20; 8:45 am] 
BILLING CODE 8026–03–P 
CONSUMER PRODUCT SAFETY 
COMMISSION 
16 CFR Part 1253 
[Docket No. CPSC–2019–0023] 
Children’s Toys and Child Care 
Articles: Determinations Regarding 
ASTM F963 Elements and Phthalates 
for Unfinished Manufactured Fibers 
AGENCY: U.S. Consumer Product Safety 
Commission. 
ACTION: Final rule. 
SUMMARY: The Consumer Product Safety 
Commission (CPSC) is issuing a final 
rule determining that certain unfinished 
manufactured fibers do not contain the 
ASTM F963 elements or specified 
phthalates that exceed the limits set 
forth under the CPSC’s statutes and 
regulations for children’s toys and child 
care articles. Based on these 
determinations, the specified unfinished 
manufactured fibers would not be 
required to have third party testing for 
compliance with the requirements of the 
ASTM F963 elements or phthalates for 
children’s toys and child care articles. 
DATES: The rule is effective on July 1, 
2020. 
FOR FURTHER INFORMATION CONTACT: 
Stephen W. Lee, Compliance Officer, 
Office of Compliance and Field 
Operations, U.S. Consumer Product 
Safety Commission, 4330 East West 
Highway, Bethesda, MD 20814–4408: 
telephone 301–504–7814; email: slee@
cpsc.gov. 
SUPPLEMENTARY INFORMATION: 
A. Background 
1. Third Party Testing and Burden 
Reduction 
Section 14(a) of the Consumer 
Product Safety Act (CPSA), as amended 
by the Consumer Product Safety 
Improvement Act of 2008 (CPSIA), 
requires that manufacturers of products 
subject to a consumer product safety 
rule or similar rule, ban, standard, or 
regulation enforced by the CPSC, must 
certify that the product complies with 
all applicable CPSC-enforced 
requirements. 15 U.S.C. 2063(a). For 
children’s products, certification must 
be based on testing conducted by a 
CPSC-accepted third party conformity 
assessment body. Id. Public Law 112–28 
(August 12, 2011) directed the CPSC to 
seek comment on ‘‘opportunities to 
reduce the cost of third party testing 
requirements consistent with assuring 
compliance with any applicable 
consumer product safety rule, ban, 
standard, or regulation.’’ Public Law 
112–28 also authorized the Commission 
to issue new or revised third party 
testing regulations if the Commission 
determines ‘‘that such regulations will 
reduce third party testing costs 
consistent with assuring compliance 
with the applicable consumer product 
safety rules, bans, standards, and 
regulations.’’ Id. 2063(d)(3)(B). 
To provide opportunities to reduce 
the cost of third party testing 
requirements consistent with assuring 
compliance with any applicable 
consumer product safety rule, ban, 
standard, or regulations, the CPSC 
assessed whether children’s toys and 
child care articles manufactured with 
seven manufactured fibers: polyester 
(polyethylene terephthalate (PET)), 
nylon, polyurethane (spandex), viscose 
rayon, natural rubber latex, acrylic, and 
modacrylic, would comply with CPSC’s 
requirements for ASTM F963 elements 
or phthalates. The Commission 
determines that such materials will 
comply with CPSC’s requirements with 
a high degree of assurance. Therefore, 
manufacturers do not need to have those 
materials tested by a third party testing 
laboratory in order to issue a Children’s 
Product Certificate (CPC). 
2. ASTM F963 Elements 
Section 106 of the CPSIA provides 
that the provisions of ASTM 
International, Consumer Safety 
Specifications for Toy Safety (ASTM 
F963), shall be considered to be 
consumer product safety standards 
issued by the Commission.1 15 U.S.C. 
2056b. The Commission has issued a 
rule that incorporates by reference the 
relevant provisions of ASTM F963 at 16 
CFR part 1250.2 Thus, children’s toys 
subject to ASTM F963 must be tested by 
a CPSC-accepted third party laboratory 
and demonstrate compliance with all 
applicable CPSC requirements for the 
manufacturer to issue a CPC before the 
children’s toys can be entered into 
commerce. 
Section 4.3.5 of ASTM F963 requires 
that surface coating materials and 
accessible substrates of children’s toys 
that can be sucked, mouthed, or 
ingested 3 must comply with the 
solubility limits of eight elements given 
in Table 1 of the toy standard. The 
materials and their solubility limits are 
shown in Table 1. We refer to these 
eight elements as ‘‘ASTM F963 
elements.’’ 
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