Paycheck Protection Program Loan Checklist

Due to the speed at which the SBA put together the Paycheck Protection Program, there are still uncertainties and questions about the program and its implementation. The following checklist raises issues and poses questions that credit unions should consider and answer, as they determine whether to offer these loans or not.

Online Resources:

Questions to Ask Before Starting:

  • Is the credit union already an SBA approved 7(a) lender?
  • Does the credit union wish to become an approved lender for the PPP loans? If not, would the credit union refer members seeking these loans to other credit unions
  • Has the credit union done an evaluation of liquidity and taken into account what having these loans on their books will look like?
  • Has the credit union set a concentration limit on the amount of PPP loans it will make available?
  • Has the credit union considered the rate and term impacts?
  • Has the credit union considered the costs to administer the program?
  • Has the credit union put a policy in place? (CU PolicyPro has created model policy 7436 – CARES Act to help credit unions implement their programs.)
  • Has the credit union reviewed NWCUA compliance bulletins and interim final rules to understand the program?
  • Does the credit union wish to partner with a vendor that specializes in SBA lending? If so, please contact Strategic Link.
  • Has the credit union notified its state and/or federal regulator that it will be participating?

Next Steps to Become a PPP Lender:

  • Complete and submit the Paycheck Protection Program Lender Application Form (SBA Form 3506) by emailing the completed form to Delegatedauthority@sba.gov. Include Incumbency Certificate (see NWCUA Compliance Bulletin 20-09).
  • Once the application is approved, the credit union will receive an e-mail from the SBA approving the credit union for the Paycheck Protection Program. The email will include E-Tran login information.
  • This initial E-Tran approval is to set up the first authorizing officer with the credit union. Other users will need to register using the credit union’s location ID. The authorizing officer will need to establish and approve the roles for the additional users. Instructions for the process can be found in the “?” on the upper left hand corner of the CAFS login page.
  • Additional higher Level II CLS approvals are completed and approved from the SBA. The approvals of the requests are being completed in batches. Credit unions will have to keep checking for these approvals to come through due to the current high volume of requests.

Member Application and Underwriting:

  • If the credit union is establishing a process to receive applications remotely, ensure strong data security procedures are in place. The application information contains PII information.
  • To apply, the borrower brings a completed Borrower Application (SBA Form 2483) and supporting payroll documentation. Generally, IRS Form 941 works best. Refer to NWCUA Compliance Bulletin 20-07 for details.
  • Underwriting – for more details, refer to the Paycheck Protection Program Loan Underwriting and Processing Checklist provided by Farleigh Wada Witt, which is available on the NWCUA Coronavirus Resource Center.
  • The credit union must complete a PPP Note – if you need a note for the program, please contact Farleigh Wada Witt by emailing Hal Scoggins, with a copy to Julie Burney at jburney@fwwlaw.com. The SBA has provided SBA Standard Loan Note (Form 147) on its site. This is Version 4.1 that was released on 6.3.02 and contains sections that are not required for PPP loans. The FAQs that were updated on the Treasury site (4.8.2020) states that lenders may use their own promissory note or an SBA form of promissory note.
  • It is suggested to have the borrower complete SBA Form 1919. While not required by the interim final rule, the information gathered on form 1919 will make inputting the loan into E-Tran easier and not require the credit union to go back to the borrower to obtain information that it may not already have.
  • Another suggestion is to note in the application the distribution of the loan proceeds by the borrower to the various items such as monthly payroll, mortgage interest, utilities. SBA system will ask for this information. When inputting the loan into the SBA’s E-Tran system, it will ask for the breakdown of how the funds will be applied.
  • The credit union should gather the zip code +4 information since E-Tran as required by E-Tran.
  • Gather the correct NCAIS code for the applicant/business.

 Determine Loan Amount:

  • As part of the underwriting process, the credit union will need to determine the maximum loan amount. The interim final rule provides examples which are included in NWCUA Compliance Bulletin 20-07. The PPP Loan Underwriting & Processing Checklist also provides a section to calculate the borrower’s loan limit.
  • In order to ensure the loan is fully forgivable, credit unions may wish to establish a process to verify the loan amount fully falls under the forgiveness thresholds, with at least 75% of the loan amount being attributed to payroll costs and covering only what would be needed for the 8 week period following the date of the loan. Making the internal decision about the amount to approve is critical.
  • If the credit union is also holding the mortgage for the business, take into account interest-only payments. (Unless those amounts push the loan out of the fully forgivable threshold.)

 Submitting Loan Authorization Requests:

  • Be careful when entering passwords for E-Tran, and encourage team members to enter passwords carefully. Repeated attempts to enter a password into the system can result in temporary account suspension (due to security protocols) requiring a password reset.
  • A new process was been updated by the SBA on 4.7.2020 for the Lender Gateway listed on the SBA page. Note that this process requires an authorization number. Other lenders have reported success using the location code for the closest SBA office: Seattle – 1000, Spokane – 1094, Portland – 1086, Boise – 1087.
  • The SBA has been providing instructions for accessing the system with newly approved lender applications.
    • Access the old SBA CAFS webpage
    • Follow the steps in Not Enrolled? to create an account
    • When entering loan information in E-Tran, make sure to choose “PPP” from the first drop down menu and input information from SBA Form 2484 into system
    • SBA will return loan authorization confirmation and ID number to credit union

Disbursing funds:

  • After receiving authorization confirmation and ID from SBA, the credit union can disburse funds to member.
  • Update from FAQ, 4.8.2020: The lender must make the first disbursement of the loan no later than ten calendar days from the date of the loan approval.

Loan Servicing:

  • More information is needed from the SBA. We do anticipate a secondary market where credit unions can sell these loans in a federally-backed market place.
  • On 4.9.2020, the Federal Reserve Board announced the Paycheck Protection Program Lending Facility.

Loan Forgiveness

  • Member can apply to the credit union for loan forgiveness no earlier than 7 weeks after the PPP loan was approved.
  • See NWCUA Compliance Bulletin 20-07 for what the member will need to bring in order to apply for forgiveness and what is covered under the 8 weeks of forgiveness.
  • Process for submitting loan forgiveness reports to the SBA has not been worked out. The SBA is to purchase the loan(s) up to the amount of forgiveness within 15 days after receiving the report from the lender.

Member Payments after Deferral and Forgiveness

  • If a portion of the loan is not forgiven by the end of the 6-month deferral period, the borrower will need to start making payments on the PPP loan. Some considerations are:
    • Deferral period for loans is 6 months
    • Reduce principle by any forgiveness received
    • Amortize remaining payments over remaining 18 months of life of loan
    • Member will need to start making payments

If you have any questions or need additional information about the SBA’s PPP loans, contact the NWCUA’s Compliance Team at compliance@nwcua.org or 800.546.4465.

Posted in Article Post.