Signed into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes a number of measures targeting small business relief, including the landmark $349 billion Paycheck Protection Program (PPP or Program). An addition to the SBA’s existing 7(a) loan program, the PPP is designed to help small businesses cover 8 weeks of payroll and certain other operational costs. Qualifying PPP loans are eligible for forgiveness and an SBA guarantee.
The Program has seen overwhelming demand since it launched on April 3, 2020, with thousands of small businesses across the country applying for loans within the first 24 hours of launch. Alloy is committed to supporting this important relief effort and will continuously update this page with information to help borrowers and lenders navigate the Program throughout its duration.
The following resources may be helpful to lenders and borrowers.
- U.S. Small Business Information PPP information page, here.
- U.S. Department of Treasury Treasury PPP information page, here.
- Lender Application Form, here.
- SBA Paycheck Protection Program Interim Final Rule, here.
- SBA Paycheck Protection Program Interim Final Rule — additional guidance regarding application of affiliate rules, here.
- Summary regarding application of affiliate rules, here.
- U.S. Treasury Information Sheet for Borrowers (March 31, 2020), here.
- U.S. Treasury Information Sheet for Lenders (March 31, 2020), here.
- U.S. Senate Committee on Small Business & Entrepreneurship, Small Business Owner’s Guide to the CARES Act.
2. Lender Underwriting Obligations
The SBA issued its interim final rule (Final Rule) clarifying the contours of the PPP on April 2, 2020, just one day before the Program launched. The Final Rule provided that lender underwriting obligations will be satisfied by the following actions:
- Review of the completed Paycheck Protection Program Application form;
- Receipt of borrower certifications (contained in the Paycheck Protection Program Application form);
- Receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020;
- Confirmation of the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application; and
- Following applicable Bank Secrecy Act (BSA) requirements.
Significantly, the Final Rule also stated that with respect to the Program’s loan forgiveness provisions, the lender “does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs” and that the SBA “will hold harmless any lender that relies on such borrower documents and attestation from a borrower.”
3. Lender BSA Obligations
Although the PPP streamlines a number of existing 7(a) requirements, it does not curtail the requirements of the Bank Secrecy Act (BSA). Quite the opposite, the Final Rule confirmed that regulated financial institutions already subject to the BSA are required to follow their existing BSA/AML program in issuing loans under the Program, and lenders that are not presently subject to the BSA are required to implement a BSA/AML program that is “equivalent to that of a comparable federally regulated institution.”
PPP Lenders that are not subject to the BSA should understand the nature and purpose of their customer relationships and develop customer risk profiles, and will generally be required to detect suspicious activity and report that activity to the Financial Crimes Enforcement Network (FinCEN). These Lenders should closely consider the BSA obligations of any comparable federally regulated financial institution, including whether those obligations include a customer identification program (CIP). CIP controls would require identifying and verifying the identity of their borrowers and, where those borrowers are legal entities, verifying the identities of beneficial owners. Although the Final Rule noted that it may be permissible in certain circumstances for these Lenders to rely on the CIP of a federally insured bank or credit union, it stopped short of clarifying when this would be the case.
4. Support from Alloy
Alloy is well-positioned to help SBA lenders meet the BSA requirements for the PPP. We can validate the business (KYB) as well as the individuals associated with the business, including any Ultimate Beneficial Owners (KYC). In addition, Alloy has Secretary of State coverage in all 50 states via our partner Middesk, who validates EIN and business standing.
Alloy expects there to be an increased fraud risk from the PPP, so SBA lenders will have to be prepared to perform the right checks on application data. Alloy can also perform identity checks on individuals, including checking for fraud signals about their phones, emails, and velocity of their identity, as well as flagging synthetic fraud and identity theft.
This can be done in two ways:
- Integrate Alloy’s API and configure KYB and KYC workflows: this can take several weeks to stand up as an implementation is required, but can take the data directly from the online webform that the business is applying through, and run all real-time identity checks required, with Alloy’s API returning instant decisions.
- Send Alloy batch files: Simply send the relevant data to Alloy in a CSV, and Alloy will run KYB and KYC checks for the SBA lender. This requires no integration and allows the lender to collect application data from whatever channel it’s being gathered (online, phone, etc.).
While there’s no handbook on navigating life during a pandemic, Alloy can offer you one guarantee — we’re here and 100% committed to help you and your financial institution continue to safely and seamlessly deliver financial services amidst these challenging times.
Contact us with any questions and let us know how we can support your financial institution: firstname.lastname@example.org