SBA Offers Guidance on Purchase, Charge-Off for Certain PPP Loans

The Small Business Administration has issued a procedural notice on how lenders can apply for SBA to purchase and charge off Paycheck Protection Program loans for which the borrower has not applied for forgiveness or made payment on the loan.

Banks may apply for SBA to purchase and charge off the loan in cases where a borrower has permanently closed, filed for bankruptcy or is deceased (in the case of self-employed individuals, sole proprietors, single-member LLCs, or independent contractors). In cases where the borrower has been indicted for, or convicted of, a felony related to the PPP loan or the borrower has appealed an SBA loan review denial, the lender may request guaranty purchase, without charge off, from SBA.

Effective July 15, the existing PPP platform has been programmed to allow lenders to submit requests for guaranty purchase and charge-off for individual PPP loans, SBA said. SBA also described procedures for lenders to follow when the borrower submits a forgiveness application after the lender submitted a request to SBA for guaranty purchase.