Fed permits SBA-approved non-depository PPP lenders to utilize liquidity facility

Federal Issues Agency Rule-Making & Guidance Federal Reserve SBA CARES Act Covid-19

On April 30, the Federal Reserve (Fed) announced that expanded access to the Paycheck Protection Program Liquidity Facility (PPPLF) beyond depository institutions to include all Small Business Administration (SBA) approved PPP lenders. Non-depository lenders, “includ[ing] banks, credit unions, Community Development Financial Institutions, members of the Farm Credit System, small business lending companies licensed by the SBA, and some financial technology firms” are now eligible to borrow from the PPPLF using PPP loans as collateral. In addition, the Fed announced that, in addition to using originated PPP loans as collateral, eligible borrowers can also use purchased whole PPP loans as collateral for credit extended by the Federal Reserve Banks under the facility “at a rate of 35 basis points.” The Fed’s announcement clearly states that an eligible borrower that pledges a purchased PPP loan must provide SBA documentation to prove that the lender “is the beneficiary of the SBA guarantee for the loan.” The announcement includes a PPPLF Term Sheet and a link to PPPLF frequently asked questions for additional details.