On August 23, 2024, the Small Business Administration (SBA) published an interim final rule (IFR) titled, “Business Loan Program Temporary Changes; Paycheck Protection Program—Extension of Lender Records Retention Requirements” to lengthen the required records retention for lenders that made loans under the Paycheck Protection Program (PPP) to ten years. The provisions of this IFR are effective August 22, 2024, with comments due by September 23, 2024.
The CARES Act Section 1102 had amended Section 7(a) of the Small Business Act to add a temporary product to authorize existing SBA-certified lenders, federally insured credit unions, and additional lenders as determined by SBA and the Treasury that are participating in the PPP to offer loans that will provide small businesses with funds to continue to pay employees and to pay interest on mortgages, and to pay rent and utilities. Section 1106 of the CARES Act provided for forgiveness of up to the full principal amount of a PPP loan.
SBA posted the first interim final rule implementing the PPP on SBA’s website on April 2, 2020, and published the rule in the Federal Register on April 15, 2020. SBA subsequently issued numerous additional interim final rules. In particular, on February 5, 2021, SBA published an interim final rule implementing Economic Aid Act changes related to the forgiveness and review of PPP loans (Consolidated Forgiveness and Loan Review IFR).
Under the Consolidated Forgiveness and Loan Review IFR, federally regulated lenders that participated in the PPP Program are currently required to retain their PPP loan records in accordance with the records retention requirements imposed by their federal financial institution regulator. SBA has determined that there do not appear to be any consistent or specific time requirements imposed by federal financial institution regulators that are applicable to PPP records retention as a whole. Instead, federally regulated PPP lenders may implement and follow general internal records retention policies that are acceptable to their regulators. It is likely that many of these general internal records retention policies allow for periodic destruction of certain records after a loan is paid in full, which for PPP would include payment in full through forgiveness or otherwise.
SBA has been making forgiveness payments to lenders on PPP loans since late 2020, so there is considerable time sensitivity associated with the need to extend the current PPP records retention requirements for federally regulated lenders.
Therefore, this IFR extends the records retention requirements for all PPP lenders to ten years from the date of final disposition of each individual PPP loan. This IFR harmonizes the PPP lender records retention requirements with subsequent legislation extending the statute of limitations for criminal charges and civil enforcement actions for alleged PPP borrower fraud to ten years after the offense.
This IFR applies to all PPP lender loan records. These records retention requirements apply to all PPP loan records, including First Draw PPP Loans and Second Draw PPP Loans. This also includes PPP loan applications that were withdrawn, approved, denied or cancelled, and all other PPP lender loan records for PPP loans with an outstanding balance, PPP loans that have been forgiven, and PPP loans that are in repayment or have been paid in full by the borrower as of the effective date of this rule.
SBA’s IFR impacts the lending, operations, legal, and risk management departments. All policies, procedures and operations must be updated to reflect the records retention requirements for all PPP lenders to ten years from the date of final disposition of each individual PPP loan.