Update on the SBA 10-Day Rule for PPP Loans

UPDATE: The PPP loan application period ended May 31, 2021. Learn about financing options available for small businesses today at Lendio.com

The US Small Business Administration (SBA) released a new interim final rule for loans under the Paycheck Protection Program (PPP). The update clarifies some confusion caused by the SBA’s previous guidance regarding the 10-day window for disbursement of funds. 

Under the new interim final rule, lenders have 10 calendar days from April 28 to disburse funds for borrowers who previously had been issued a Preferred Lender Program (PLP) number for their loan. This rule provides assurance for borrowers who have passed or are approaching the 10-day period and worried that their loans may not be funded. However, the disbursement extension comes at the end of the month when many small businesses are struggling to meet May bills, and this extension will add to their financial burdens.

Initial guidance from the SBA stated that lenders had to disburse funds for PPP loans within 10 days of a borrower receiving a PLP number from the SBA. The overwhelming demand for the loans led to the first $350 billion of funds being exhausted within 2 weeks of the application opening. 1.6 million loans were approved during that round, and lenders have been struggling to disburse funds for all the loans within 10 days of a PLP number being issued. 

The new interim rule also provides guidance for the 10-day rule going forward. For new loans, lenders will have 10 calendar days to disburse funds starting from the date a borrower receives a PLP number. The eligible period for potential loan forgiveness begins on the date funds are disbursed—for both past and future PLP number recipients. 

The interim rule included additional guidance for the loans. Going forward, if funds cannot be disbursed due to a delay from the borrower (like missing paperwork), the lender has a total of 20 calendar days to disburse funds. If they still do not have adequate information to fund the loan, the lender may cancel the loan. If loan funds are designated for a refinance of an EIDL, those funds will be deducted from the disbursement amount and paid by the lender to the SBA directly. 

While every effort is made to ensure the accuracy of information when a story is published, the coronavirus pandemic and Paycheck Protection Program (PPP) have caused details to change at a rapid pace. Additional guidance from the government may change or clarify certain aspects of the forgiveness process and could result in changes to the information contained in these pages. For the most up-to-date information, please visit the COVID-19 section of our website. For more information, you can call us at (855) 853-6346. Lendio is not responsible for and provides no warranty as to the accuracy of this content. Lendio does not provide legal, accounting or tax advice. The information and services Lendio provides should not be deemed a substitute for the advice of such professionals who can better address your specific concern and situation.