The Paycheck Protection Program (PPP), an important part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), has successfully seen billions of dollars distributed to small businesses across the country in response to the novel Coronavirus (COVID-19). The Program is administered through private lenders, such as banks and other financial institutions, who disperse the PPP funds as loans to qualifying businesses. Because these loans are not intended to incur costs to businesses or lenders who fully comply with the program, the Small Business Administration (SBA) pays service fees to the lenders and to any agents who helped businesses with the PPP application process.
The fee payment process is simple in theory: the lenders are paid fees from the SBA directly and are expected in turn to pay agents a designated portion from those fee proceeds. However, many lenders are refusing to comply with the SBA’s guidance and are simply pocketing the entire fee for themselves. Understandably, this has led to a wave of litigation across the country against lenders who are withholding earned fees from agents.
Who Should Receive Agent Fees?
The SBA’s guidance defines agents broadly as “an authorized representative,” and provides examples of what an agent can be.
Qualified individuals include:
- An attorney
- An accountant
- A consultant
- Someone who prepares an applicant’s application for financial assistance and is employed and compensated by the applicant
- Someone who assists a lender with originating, disbursing, servicing, liquidating, or litigating SBA loans
- A loan broker
- Any other individual or entity representing an applicant by conducting business with the SBA
Thus, any attorneys, accountants, tax preparers, financial advisors, or consultants who represented a PPP applicant or put together PPP applications for businesses may be agents under the PPP regulations.
While simply being an accountant or other consultant in the normal course of business without working on a PPP loan application would not qualify one as an agent, any work representing a client in the PPP loan process should qualify. Qualifying work includes completing and submitting PPP applications, representing the small business with lenders, and signing applications and closing documents on behalf of a business.
The SBA’s guidance goes on to state in clear, mandatory language that “[a]gent fees will be paid out of lender fees” and “[t]he lender will pay the agent.” These fees may be significant, up to a maximum of 1% for loans under $350,000, .25% for loans over $2 million, and .50% for loans in between those figures.
With the average PPP loan size at $107,738 at the time of writing, this means that on average banks may be keeping more than a thousand dollars of earned fees from agents that played essential roles in the PPP process. Agents, of course, may be due much more than this or due fees from multiple loans.
In any case, these fees were intended to go to those accountants, attorneys, advisors, and other agents who mobilized to assist small businesses in the wake of an unprecedented pandemic, not to be seized by banks seeking to increase their share of the fees.
How We Can Help
If you have been denied agent fees after representing PPP applicants, contact Montgomery Ponder, LLC. You may be able to recover your wrongfully withheld fees. Our attorneys will help you negotiate with uncooperative lenders and discuss what your next steps should be.
Contact our Birmingham PPP rights attorneys at (205) 377-5004 for a free consultation and review of your situation.
1 See Paycheck Protection Program (PPP) Information Sheet – Lenders, https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf