The Federal Reserve Board has issued the third extension of a temporarily modified Small Business Administration (SBA) Paycheck Protection Program (PPP) rule.
Officials said the action would enable certain bank directors and shareholders to apply to their banks for PPP loans for their small businesses – adding in order the prevent favoritism, the Federal Reserve Board places a limit on the types and quantity of loans bank directors, shareholders, officers and businesses owned by can receive from their affiliated banks.
The SBA noted last year, PPP lenders can make PPP loans to businesses owned by their directors and certain shareholders, officials indicated, with the guidance being subject to certain limits – indicating the extension only applies to PPP loans.
The rule extension is effective immediately, applies to PPP loans made from March 31 through June 30, 2021, and continues to apply if the PPP is extended, with the change ultimately sunsetting on March 31, 2022. Public comments will be accepted for 45 days after publication in the Federal Register, per authorities.
The SBA has prohibited banks from prioritizing or providing favorable processing time to PPP loan applications from a director or equity holder, according to officials. The Federal Reserve Board is slated to administer the rule extension accordingly.
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