On May 21, 2020, the U.S. Small Business Administration (“SBA”) released a notice informing lenders of how they may collect loan processing fees for eligible loans issued under the Paycheck Protection Program (“PPP”).

Pursuant to the CARES Act and the Interim Rule, issued by the SBA on April 2, 2020, the SBA will pay fees to lenders for processing eligible PPP loans at the following rates, based on the balance of the loan outstanding at the time of full disbursement:

  • 5% for loans under $350,000;
  • 3% for loans between $350,000 and $2 million; and
  • 1% for loans over $2 million.

However, in order to collect the processing fee on a PPP loan, a lender must first report to the SBA that a loan has been fully disbursed using SBA Form 1502.  The SBA will begin accepting these reports on fully disbursed PPP loans on May 22, 2020.  Once the report is received, the SBA will initiate the process of paying the PPP processing fee for which the lender is eligible.

Lenders will not receive processing fees for PPP loans in the following circumstances:

  • Prior to full disbursement of the loan;
  • If the loan is cancelled before disbursement;
  • If the PPP loan is cancelled or voluntarily terminated and repaid after disbursement but before the borrower certification safe harbor date of May 18, 2020 (including if a borrower repays the PPP loan because of a misunderstanding or misapplication of the borrower’s certification regarding the necessity of the PPP loan request); or
  • If the PPP loan is cancelled, terminated or repaid after disbursement (and after the borrower certification safe harbor date of May 18, 2020) because SBA conducted a loan review and determined that the borrower was ineligible for a PPP loan.

Importantly, lenders should also be aware that the SBA will require processing fees to be repaid  if the SBA determines that either the borrower was ineligible to receive a PPP loan within one year after loan disbursement or that the lender has not fulfilled its obligations under the PPP.  Repayment of processing fees due to a borrower’s ineligibility will have no effect on the SBA’s guaranty of the loan, provided that the lender complied with its obligations under the PPP.  In cases where the lender is found to have not complied with relevant obligations, the SBA will seek repayment of the loan processing fee and may also determine that the loan is not eligible for a guarantee.

For more information please see the SBA’s notice, PPP Lender Processing Fee Payment and 1502 Reporting Process, available here.