How to Become an SBA Lender for the CARES Act’s Paycheck Protection Program

Mary Ellen Biery
April 1, 2020
Read Time: min

Banks and credit unions are scrambling to determine how to become eligible to originate Paycheck Protection Program loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Thankfully, the Small Business Administration (SBA) and Treasury Department finally released details, though they are still finalizing the logistics of the SBA loan program.

SBA lenders, insured depositors, CUs, eligible

SBA Administrator Jovita Carranza and Treasury Secretary Steven T. Mnuchin on Tuesday announced that in addition to all existing SBA-certified lenders, all federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions are eligible to participate in the Paycheck Protection Program.

“Our goal is to position lenders as the single point-of-contact for small businesses – the application, loan processing, and disbursement of funds will all be administered at the community level,” Carranza said in a news release. “Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans. We remain committed to supporting our nation’s more than 30 million small businesses and their employees, so that they can continue to be the fuel for our nation’s economic engine.”

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Businesses can begin applying April 3

Starting April 3, small businesses and sole proprietors can begin applying for up to $10 million in the CARES Act’s PPP loans, Treasury said in a news release. Independent contractors and self-employed people can begin applying April 10. The Paycheck Protection loans, 100% guaranteed by the SBA and requiring no borrower or lender fees payable to the SBA, are aimed at providing relief to small businesses so they can sustain their businesses and keep their workers employed. Loans are actually retroactive from Feb. 15, 2020, enabling employers to rehire recently laid-off employees, and they are available through June 30, 2020, according to the fact sheet distributed by the SBA and Treasury. Loan amounts are determined by multiplying average monthly payroll by 2.5. The portion of the loan proceeds used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest will be forgiven.

The Treasury Department said “a broad set of additional lenders” will be able to begin making loans as soon as they are approved and enrolled in the program.

Lenders who are new to the SBA 7(a) program or who are unable to verify that they have a Form 750 will need to complete an applications (on SBA Form 3506) in order to participate as a lender in the Paycheck Protection Program. Form 3506 is available on Abrigo's SBA resources page. See additional information on applying to become a PPP lender.

The SBA and Treasury Department also unveiled the application form for borrowers, SBA Form 2483. Estimated to take 8 minutes to complete, the two-page application requires that documentation be provided to the lender verifying the number of full-time equivalent employees on payroll, as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight-week period following the loan. 

For underwriting, lenders will need to verify a borrower was in operation on Feb. 15 and verify the borrower had employees for whom they paid salaries and payroll taxes. Lenders will also need to verify the dollar amount of average monthly payroll costs and follow applicable Bank Secrecy Act requirements, according to the information released by the Treasury Department and the SBA.

Financial institutions moving quickly

Financial institutions will need to move quickly to help small businesses land some of the $349 billion in Paycheck Protection Program loans. Many banks are already reaching out to small business customers so that they can get a head start compiling payroll information.

Farmers State Bank in Harrisburg, Illinois, for example, has been emailing customers and putting information about SBA relief loans on its website to help small business customers get a jump on applying. The response has been strong, with about 200 responses coming in since Thursday, said Chris Healy, President of Small Business Lending at Farmers State Bank.         

Farmers State Bank is using Abrigo solutions, including the Sageworks SBA Lending solution and Abrigo’s online loan application, to help handle the high volume of interest. “We’re very fortunate that we have the Abrigo system,” Healy said. “We’re going to run 100% of the SBA Paycheck Protection Program loans through it.” 

Healy expects the automated Abrigo solution will allow borrowers to upload required information remotely so the bank can quickly process it and transmit the application to E-Tran, the SBA’s loan-approval portal. “We want to make this as easy as possible.” Healy said. “It’s a great tool, especially in times like this when you don’t want people to meet face to face.”

For more information on the Paycheck Protection Program and how to manage through it, visit Abrigo’s CARES Act and Paycheck Protection Program Resources page, and register for Friday’s webinar, “SBA Lending: What’s Going On and How Abrigo Can Help.


About the Author

Mary Ellen Biery

Mary Ellen Biery is a Senior Writer and Content Specialist at Abrigo.

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