Remember the mad rush of first and second round PPP loans? As you and your team worked overtime, late nights, and weekends to process the applications, did you circle June 30, 2021 when the program ended as a time to celebrate? Wahoo! Yippee! Hooray! Pick your favorite.
Celebrating Too Soon? You hoped and prayed that all PPP loans would be forgiven. Alas, some were not. Now, borrowers face an unexpected obligation, an obligation they anticipated would be forgiven. And now you’re faced with continuing to service these loans, … monitoring for payments, 1502 reporting, possibly restructuring loans that weren’t forgiven – or even worse, the borrower can’t pay and files for bankruptcy. Now, what?
Join the Lender Chorus: “I Want My Guaranty.” That SBA agreed to guaranty PPP loans 100% with NO collateral eased the heartburn of making a 1.00% loan. Getting full repayment from the SBA without the painful liquidation process makes it much easier to resolve these loans. SBA Procedural Notice 5000-812316 effective July 15, 2021 eased the pain. To recap: Lenders can put in for the guaranty AND request charge off when the borrower:
- Is 60 days or more past due on scheduled loan payments and the default has not been cured;
- Is permanently closed and does not plan to submit a forgiveness application;
- Has filed for Chapter 7 bankruptcy protection;
- Has filed for Chapter 11, 12, 13 bankruptcy once a period of at least 60 days has elapsed from the end of the PPP loan deferment period or any time after an order is entered confirming a plan if the plan does not provide for payment of 100% of the underlying debt; or
- In the case of self-employed individuals, sole proprietors, single-member LLCs, or independent contractors, the owner is deceased.
Easy Peasy. After putting in for the guaranty/charge off, you just wait for SBA’s payment.
Easy Peasy? Not Always. There are situations where you can request the guaranty but the loan cannot be charged off. For example, if a borrower is contesting SBA’s final loan review by filing an appeal with the Office of Hearings and Appeals (OHA), you can put in for the guaranty 60 days after the filing. Or, if a borrower or someone with 20% ownership of a borrowing entity that has been indicted for or convicted of a felony in connection with the PPP loan, the same procedure would apply.
Submitting Requests for Guaranty Purchase and Charge-Off. It’s likely you’re familiar with the PPP Platform. The option, “Guaranteed Purchases” allows you to see the status of applications for the guaranty and to input your loan for payment. Here, SBA truly makes it easy peasy. I won’t spoil the fun by telling you all the options, but if you use the Platform to get the guaranty, you’ll be impressed. Just be sure to have ready to upload:
- Copy of the Note
- Completed and signed Lender’s Transcript of Account
- Signed SBA Assignment Form
And of course, for services to help keep your SBA program running, Contact JRB. Happy (Almost) Anniversary!