Client Alert: PPP Promissory Note Issues
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.
We Can Help You
We have been on the forefront of dealing with COVID-19 (coronavirus) for our clients. Please contact us if you would like to discuss any of these issues or if we can otherwise be of assistance.
We recommend reviewing the following pandemic-related business and legal considerations we have been discussing with our clients: