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Client Alert: PPP Promissory Note Issues

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Consider Deficiencies In SBA Note Form Before Using

The SBA recently issued guidance that suggests banks could use SBA Form 147 (the SBA’s form note for 7(a) loans) or their own form of promissory notes or so that Paycheck Protection Program (PPP) funds can be quickly disbursed.

However, SBA Form 147 and standard form unsecured notes do not contain protections for banks, given the unique nature of PPP loans. For example, SBA Form 147 does not contain any PPP-specific terms, as well as customary terms that we would normally recommend that banks use, such as jury waivers, lender releases, and other waivers that protect banks.

Additionally, the SBA’s recommendations do not abrogate a bank’s responsibility to practice safe and sound lending practices. Accordingly, banks should consult with counsel before using SBA Form 147 to document their PPP loans at this time without substantial additional language to protect banks. We are currently working with banking associations on suggestions to significantly augment SBA Form 147 and standard form unsecured promissory notes.

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