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Affiliate and Family Member Relationships Under the Paycheck Protection Program: Top Five Things for Lenders to Know in Navigating Potential Conflicts of Interest

Alert April 23, 2020

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  • Affiliate and Family Member Relationships Under the Paycheck Protection Program: Top Five Things for Lenders to Know in Navigating Potential Conflicts of Interest

Affiliate and Family Member Relationships Under the Paycheck Protection Program: Top Five Things for Lenders to Know in Navigating Potential Conflicts of Interest

April 23, 2020, Covington Alert

As the Paycheck Protection Program (“PPP”) is about to re-open following passage of a bill that will provide additional $310 billion in funds to the program (including funds reserved for loans by certain small and mid-sized lenders), the rules of the Small Business Administration (“SBA”) that prohibit or restrict loans to the small business ventures of bank officers, directors, and investors – and their family members – again take on renewed importance. Because the SBA rules on conflicts of interest and self-dealing range widely over individuals and small companies, they present compliance risk as well as reputation and litigation risk. The necessary speed in making loans under the program before the additional funds are exhausted, however, makes it extremely difficult for a lender to develop new policies and procedures that are specific to the program.

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