Excess Loan Amount Errors

Looking for something specific? Search for it here:

What is an Excess Loan Amount Error?

An excess loan amount error is a borrower or lender error made in good faith that caused a borrower to receive a PPP loan amount that exceeds the borrower’s correct maximum loan amount under the CARES Act and the Economic Aid Act. An excess loan amount error does not include a knowing misstatement. Knowing misstatements may result in additional action, such as charges for fraud.

 

Example 1: Borrower Error: 

Borrower mistakenly failed to subtract amounts paid to employees in excess of $100,000 (annualized and prorated) from reported payroll costs, as required by the CARES Act and Economic Aid Act. Lender performed a good faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning average monthly payroll costs, and did not identify an error in the borrower’s calculation of its payroll costs. As a result, the loan amount approved for the borrower exceeded the borrower’s maximum loan amount.

 

Example 2: Borrower Error: 

Borrower mistakenly included payments to an independent contractor in its calculation of payroll costs on its PPP Borrower Application Form. Lender performed a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning average monthly payroll costs and did not identify the error. As a result, the loan amount approved for the borrower exceeded the borrower’s correct maximum loan amount.

 

Example 3: Lender Error: 

Borrower applied for and was eligible for a $25,000 PPP loan. Lender inadvertently approved borrower for a $35,000 loan due to a lender employee data input error. As a result, the borrower’s approved loan amount exceeded the borrower’s correct maximum loan amount.

What is the effect of an excess loan amount error on loan forgiveness?

A borrower may not receive loan forgiveness for any amount that exceeds the correct maximum loan amount permitted by statute for that borrower. This is true whether the excess loan amount was caused by borrower error or lender error.

 

When preparing or reviewing a loan forgiveness application, if a borrower or lender identifies an error that resulted in a borrower receiving a larger PPP loan than the borrower was eligible to receive, the lender must issue a decision to SBA denying forgiveness for the amount that exceeded the borrower’s correct maximum loan amount. If an excess loan amount error is discovered after the lender has already submitted a forgiveness decision to SBA, the lender should promptly request the withdrawal of the lender loan forgiveness decision by notifying SBA through the SBA Paycheck Protection Platform. The lender may then submit a new lender loan forgiveness decision for the correct amount through the SBA Paycheck Protection Platform. A borrower must repay any unforgiven portion of a PPP loan. If a lender discovers an excess loan amount error after SBA has issued a final loan forgiveness decision and remitted payment, lender must promptly notify the borrower and SBA through the SBA Paycheck Protection Platform.

What is the effect of an excess loan amount error on the SBA’s loan guarantee?

Borrower Error. If an excess loan amount error is due solely to the borrower’s error in completing the loan application form, the borrower error does not invalidate SBA’s guarantee of the PPP loan. 

 

For example, if a borrower received a PPP loan amount that exceeds its correct maximum loan amount because the borrower incorrectly calculated its payroll costs and a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning average monthly payroll cost by the lender did not identify the error, the SBA guarantee would remain in effect. However, excessive occurrences or patterns of undetected borrower errors may indicate a lender did not perform a good-faith review of borrowers’ calculations or supporting documents concerning average monthly payroll costs and could be grounds for further review of the lender by SBA, which could affect the guarantee. 

 

Lender Error. If an excess loan amount error is due in whole or in part to the lender’s failure to satisfy its obligations under PPP rules and the document collection and retention requirements described in the lender application form (SBA Form 2484 and SBA Form 2484-SD), the SBA guarantee will not apply to the excess loan amount. For example, if the lender approved a borrower for a loan amount for which the borrower did not submit payroll documentation, it indicates that the lender did not satisfy its PPP lender obligations and the document collection and retention requirements described in the lender application form (SBA Form 2484 and SBA Form 2484- SD) with respect to the loan. Accordingly, the SBA guarantee would not apply to the portion of the loan amount that exceeds the borrower’s correct maximum loan amount.

What is the effect of an excess loan amount error on a borrower’s obligations?

If the lender or SBA, as applicable, determines a borrower was ineligible for any portion of its loan amount, forgiveness will be denied for the ineligible portion and the borrower must begin making payments on the remaining loan amount. Any unforgiven loan amounts remain obligations of the borrower, even if the borrower was ineligible to receive some or all of the loan.