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(May 15, 9:30 PM EDT) House passes HEROES Act

(May 15)  HEROES Act and SBA lending

Later today, the House will vote on Speaker Pelosi’s HEROES Act, which includes a number of technical fixes to PPP and enhancements to the regular 7(a) program.  While the HEROES Act will likely pass a Democrat-controlled House, it is not expected to be taken up by the Senate, which has a different perspective and strategy regarding the path forward for any continuing emergency-response legislation. However, the Pelosi package will serve as a first marker for any future legislation, and to that end, NAGGL worked with the House and flagged critical areas of concern regarding the PPP, including (but not limited to): strengthening the hold harmless language for lenders, bifurcating the 7(a) and the PPP authorization caps to ensure stability for the regular 7(a) program (see two letters [#1 and #2] from NAGGL to congressional leadership urging them to solve this concern, as well as a letter of support from NAGGL urging swift passage of a standalone bill in the Senate to bifurcate the authorization caps), ensuring that program parameters apply for the life of the loan, and ensuring that allowed uses of proceeds are included in the forgiveness process. Since March, NAGGL has also encouraged Congress to pass legislation that would provide enhancement provisions to the regular 7(a) program, including increased guaranty percentage, fee waivers, deferral flexibility, increased SBA Express maximum loan size, and increased 7(a) authorization and secondary market authorization caps, among others (see NAGGL’s March letter with other lending trades to Congress).  NAGGL is currently engaged in conversations with the Senate on both sides of the aisle to discuss ways that they are approaching any future legislation and how to improve both the PPP and opportunities for the 7(a) program. We will continue to raise your and your borrowers’ concerns as the dialog continues. 

Below is a list of some of the key provisions included in HEROES Act (Note: Provisions related to PPP begin in Division I on p. 821): 

  • Extends the PPP covered period from June 30th to December 31st 
  • Extends some eligibilities to specific entities, such as hospitals in bankruptcy and all 501(c) nonprofits
  • Extends the PPP loan minimum loan maturity to 5 years
  • Set asides for borrowers of certain sizes
  • Clarifies that fee waivers, the waiver of credit elsewhere, and the waiver of a personal guaranty apply for the life of the loan (*a specific NAGGL ask)
  • Requires that interest is not calculated on a compound basis, but rather a simple-interest basis
  • Requires that any amounts returned by a borrower will be set aside for small businesses with 10 or fewer employees
  • Bifurcates 7(a) and PPP authorization caps (*a specific NAGGL ask, however, NAGGL has concerns that the final language does not sufficiently bifurcate the authorization caps and needs further changes)
  • Lengthens the 8-week period to 24 weeks or December 31
  • Extends rehire exemptions from June 30th to December 31
  • Clarifies that all uses of proceeds are allowed in forgiveness (*a specific NAGGL ask)
  • Requires the addition of collecting veteran status, gender, race, and ethnicity data in the forgiveness application 
  • Increases flexibility on forgiveness if rehires cannot be made
  • Eliminates the 75%-25% ratio on payroll to non-payroll expenses
  • Strengthens the hold harmless language for lenders (*a specific NAGGL ask, however, NAGGL has concerns that the final language does not sufficiently provide the broader protections lenders need and needs further changes)
  • Mandates extensive reporting on PPP and EIDL programs to Congress that includes loans by number and dollar amount, demographics, industry, geography, NAICS code, etc., as well as amounts lenders paid in broker fees and total amount of lender compensation fees paid to each lender.  Details on processing times for loan approvals, disbursements, and notices of forgiveness to borrowers is also a part of the reporting

And regarding regular 7(a) loans, the legislation proposes: (*all specific NAGGL asks)

  • Increases the 7(a) authorization cap to $75 billion for FY20 and increase the secondary market authorization cap to $35 billion for FY20 (located on p.42 of the bill); 
  • Provides increased deferral flexibility
  • Provides fee waivers for borrowers and lenders through September 30, 2021
  • Increases guaranty percentage to 90% through September 30, 2021
  • Increases the maximum loan size to $10 million through September 30, 2021
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