Industry Letter

April 3, 2020

To:  The Chief Executive Officers or the Equivalents of New York State Regulated Institutions

The New York State Department of Financial Services (Department) is issuing this letter with respect to the Paycheck Protection Loan Program (the Program) created by the recently enacted Coronavirus Aid, Relief and Economic Security Act (CARES Act), through which the U.S. Small Business Administration’s (SBA’s) 7(a) Loan Program ^[1] will offer a new loan product. The CARES Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Program.

As you know, the COVID-19 pandemic has placed many small businesses, not-for-profit organizations and their employees in dire need of funding to survive. The Program is intended to provide economic relief to small businesses nationwide, including the many New York businesses that have been significantly adversely impacted by the COVID-19 pandemic.

Yesterday, the SBA issued its interim final rule, announcing the implementation of the CARES Act for the Program. The interim final rule includes formal guidance that outlines the key elements of the SBA’s implementation of the Act, and the SBA requests public comments.

The interim final rule provides that a lending institution does not need to conduct any verification if the borrower submits documentation supporting its request for a loan and attests that it has accurately verified the payments for eligible costs. The SBA Administrator will hold harmless any lender that relies on such borrower documents and attestations.  The loans guaranteed under the Program will be under the same terms, conditions and processes as other 7(a) loans with certain exceptions, such as the guarantee percentage being 100%, and the lack of a requirement for collateral or personal guarantees.

The Program authorizes existing 7(a) lenders to participate in the Program, and allows for the authorization of additional 7(a) lenders if the lender is (1) a federally insured depository institution or a federally insured credit union; (2) any Farm Credit system institution with certain exceptions; and (3) certain specified types of depository and non-depository financing providers that originate, maintain and service business loans or other commercial financial receivables and participation interests, subject to meeting certain additional criteria.

Small business lending is at the core of what many of your institutions do every day. Your knowledge of the local markets and community needs, along with your underwriting skills, are exceptionally important during this time of crisis. Your active participation is critical to the success of this Program and the much needed help our small businesses deserve during this unprecedented interruption to their operations and the lives of many of their employees.

The Department strongly encourages all its institutions that are eligible to participate in the Program to participate and provide this desperately needed help to small businesses so they can weather the current crisis and sustain their employee base, subject to their safety and soundness requirements.  The Department also encourages those that are not currently eligible for participation to obtain eligibility so they can participate in the Program.

The Department appreciates all of your hard work to keep the financial system open and operating in New York State and commends you for your leadership and support of small businesses during the current crisis.

Sincerely,

Linda A. Lacewell, Superintendent
New York State Department of Financial Services

¹ The 7(a) Loan Program is the SBA’s primary program for providing financial assistance to small businesses.