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Home Source documents SBA Procedural Notice 5000-20078: Paycheck Protection Program Excess Loan Amount Errors (Effective January 15, 2021) — U.S. Small Business Administration

SBA Procedural Notice 5000-20078: Paycheck Protection Program Excess Loan Amount Errors (Effective January 15, 2021) — U.S. Small Business Administration

Summary

SBA Procedural Notice 5000-20078, effective January 15, 2021 and signed by Jihoon Kim, Director of the Office of Financial Program Operations, tells PPP lenders how to treat excess loan amount errors: good-faith borrower or lender errors that gave a borrower more than the correct maximum loan amount under the CARES Act and the Economic Aid Act. A knowing misstatement is not such an error and may result in charges for fraud. A borrower may not receive forgiveness for any amount above the correct maximum and must repay any unforgiven portion. A borrower-only error does not invalidate SBA's guarantee, but if the error is due in whole or in part to the lender's failure to meet its PPP obligations, the guarantee will not apply to the excess. One example is a lender data input error that approved a $35,000 loan for a borrower eligible for $25,000.

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                            SBA Procedural Notice

TO: All SBA Employees and Paycheck Protection                                             CONTROL NO.: 5000-20078
Program Lenders
                                                                                          EFFECTIVE: January 15, 2021
SUBJECT: Paycheck Protection Program Excess
Loan Amount Errors




This Notice informs Paycheck Protection Program (PPP) lenders of the effects of “excess loan
amount errors” made by the borrower or the lender in completing the PPP Borrower Application
Form (SBA Form 2483, SBA Form 2483-SD, or lender’s equivalent form) or the PPP Lender
Application Form (SBA Form 2484 or SBA Form 2484-SD) for First Draw PPP Loans and
Second Draw PPP Loans (collectively, “PPP loans”).

An excess loan amount error is a borrower or lender error made in good faith that caused a
borrower to receive a PPP loan amount that exceeds the borrower’s correct maximum loan
amount under the CARES Act and the Economic Aid Act. 1 An excess loan amount error does
not include a knowing misstatement. Knowing misstatements may result in additional action,
such as charges for fraud.

          Example 1: Borrower Error: Borrower mistakenly failed to subtract amounts
          paid to employees in excess of $100,000 (annualized and prorated) from reported
          payroll costs, as required by the CARES Act and Economic Aid Act. Lender
          performed a good faith review, in a reasonable time, of the borrower’s
          calculations and supporting documents concerning average monthly payroll costs,
          and did not identify an error in the borrower’s calculation of its payroll costs. As
          a result, the loan amount approved for the borrower exceeded the borrower’s
          maximum loan amount.

          Example 2: Borrower Error: Borrower mistakenly included payments to an independent
          contractor in its calculation of payroll costs on its PPP Borrower Application Form.
          Lender performed a good-faith review, in a reasonable time, of the borrower’s
          calculations and supporting documents concerning average monthly payroll costs and did



1
    15 U.S.C. 636(a)(36)(E) and (37)(C).
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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58

                                           Federal Recyling Program   Printed on Recycled Paper
        not identify the error. As a result, the loan amount approved for the borrower exceeded
        the borrower’s correct maximum loan amount.

        Example 3: Lender Error: Borrower applied for and was eligible for a $25,000
        PPP loan. Lender inadvertently approved borrower for a $35,000 loan due to a
        lender employee data input error. As a result, the borrower’s approved loan
        amount exceeded the borrower’s correct maximum loan amount.

What is the effect of an excess loan amount error on loan forgiveness?

A borrower may not receive loan forgiveness for any amount that exceeds the correct maximum
loan amount permitted by statute for that borrower. 2 This is true whether the excess loan amount
was caused by borrower error or lender error.

When preparing or reviewing a loan forgiveness application, if a borrower or lender identifies an
error that resulted in a borrower receiving a larger PPP loan than the borrower was eligible to
receive, the lender must issue a decision to SBA denying forgiveness for the amount that
exceeded the borrower’s correct maximum loan amount. 3 If an excess loan amount error is
discovered after the lender has already submitted a forgiveness decision to SBA, the lender
should promptly request the withdrawal of the lender loan forgiveness decision by notifying
SBA through the SBA Paycheck Protection Platform. The lender may then submit a new lender
loan forgiveness decision for the correct amount through the SBA Paycheck Protection Platform.
A borrower must repay any unforgiven portion of a PPP loan. 4 If a lender discovers an excess
loan amount error after SBA has issued a final loan forgiveness decision and remitted payment,
lender must promptly notify the borrower and SBA through the SBA Paycheck Protection
Platform.


What is the effect of an excess loan amount error on the SBA’s loan guarantee?

Borrower Error. If an excess loan amount error is due solely to the borrower’s error in
completing the loan application form, the borrower error does not invalidate SBA’s guarantee of
the PPP loan.



2
  See, e.g., 85 Fed. Reg. 33012 (“[I]f 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 part, as appropriate.”); 85 Fed. Reg. 38306 (“If SBA determines in the course of its review that the
borrower was ineligible for the PPP loan based on the provisions of the CARES Act, SBA rules or guidance
available at the time of the borrower’s loan application, or the terms of the borrower’s PPP loan application … the
loan will not be eligible for loan forgiveness.”).
3
  See 85 Fed. Reg. 33012; 85 Fed. Reg. 38306. The lender’s loan forgiveness decision should also deny forgiveness
for any other portion of the loan if required under the PPP rules that have been issued by the Small Business
Administration (SBA) and the Department of the Treasury implementing the Paycheck Protection Program,
including Second Draw Paycheck Protection
Program Loans, under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act and Economic
Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.
4
  15 U.S.C. 636(a)(36)(K).
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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58

                                          Federal Recyling Program   Printed on Recycled Paper
For example, if a borrower received a PPP loan amount that exceeds its correct maximum loan
amount because the borrower incorrectly calculated its payroll costs and a good-faith review, in a
reasonable time, of the borrower’s calculations and supporting documents concerning average
monthly payroll cost by the lender did not identify the error, the SBA guarantee would remain in
effect. However, excessive occurrences or patterns of undetected borrower errors may indicate a
lender did not perform a good-faith review of borrowers’ calculations or supporting documents
concerning average monthly payroll costs and could be grounds for further review of the lender
by SBA, which could affect the guarantee.

Lender Error. If an excess loan amount error is due in whole or in part to the lender’s failure to
satisfy its obligations under PPP rules 5 (as further explained in FAQ 1) and the document
collection and retention requirements described in the lender application form (SBA Form 2484
and SBA Form 2484-SD), the SBA guarantee will not apply to the excess loan amount. For
example, if the lender approved a borrower for a loan amount for which the borrower did not
submit payroll documentation, it indicates that the lender did not satisfy its PPP lender
obligations (as further explained in FAQ 1) and the document collection and retention
requirements described in the lender application form (SBA Form 2484 and SBA Form 2484-
SD) with respect to the loan. Accordingly, the SBA guarantee would not apply to the portion of
the loan amount that exceeds the borrower’s correct maximum loan amount.

What is the effect of an excess loan amount error on a borrower’s obligations?

If the lender or SBA, as applicable, determines a borrower was ineligible for any portion of its
loan amount, forgiveness will be denied for the ineligible portion and the borrower must begin
making payments on the remaining loan amount. 6 Any unforgiven loan amounts remain
obligations of the borrower, even if the borrower was ineligible to receive some or all of the
loan.


Questions:

Lenders may call the Lender Hotline at (833) 572-0502 for live assistance regarding platform
access and support, policy questions and procedures, and Capital Access Financial system
(CAFS) and SBA’s Electronic Transmission (E-Tran) systems support. Lenders may direct loan-
specific inquiries to the SBA Paycheck Protection Platform inbox; general PPP forgiveness
questions to PPPForgivenessRequests@sba.gov; requests for advanced technical support, API
support and UAT error support to developer@ussbaforgiveness.com; and requests for assistance
on SBA Paycheck Protection Platform navigation and platform user experience issues to
help@ussbaforgiveness.com.




5
  These obligations are described in the initial PPP Interim Final Rule (85 Fed. Reg. 20811), subsection C.3. of the
consolidated PPP Interim Final Rule (posted on SBA’s website Jan. 6, 2021) and subsection (h)(2) of the second
draw PPP Interim Final Rule (posted on SBA’s website Jan. 6 2021) (collectively, PPP lender obligations).
6
  See 85 Fed. Reg. 38310-11; see also subsection B.9. of the consolidated PPP Interim Final Rule (posted on SBA’s
website Jan. 6, 2021).
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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58

                                          Federal Recyling Program   Printed on Recycled Paper
Questions concerning this Notice may be directed to the Lender Relations Specialist in the local
SBA Field Office, which can be found at https://www.sba.gov/tools/local-
assistance/districtoffices.




Jihoon Kim
Director
Office of Financial Program Operations




PAGE 4 of 4                                                                                EXPIRES: 1-1-2022
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58

                                    Federal Recyling Program   Printed on Recycled Paper

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