The Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) is now available to non-bank PPP lenders to finance Paycheck Protection Program (“PPP”) loans that they originated or purchased. While the PPPLF was previously only available to depository institutions to finance PPP loans that they originated, the Federal Reserve revised its eligibility criteria on April 30, 2020 to provide funding to all Small Business Administration (“SBA”) approved lenders.[1] Terms of the PPPLF are discussed in our earlier blog post.
With respect to PPPLF borrowers that are not depository institutions or credit unions, the Federal Reserve Bank of Cleveland will lend to community development financial institutions (that are not credit unions or depository institutions), the Federal Reserve Bank of Minneapolis will lend to members of the Farm Credit System and small business lending companies, and the Federal Reserve Bank of San Francisco will lend to all other eligible borrowers that are non-depositories.[2]
Eligible borrowers now may also pledge as collateral PPP loans that they have purchased, but did not originate themselves. An institution that pledges a purchased PPP loan will need to provide the Federal Reserve with documentation demonstrating that the institution is the beneficiary of the SBA guarantee for the loan. PPP loans pledged as collateral to secure extensions of credit under the PPPLF will be valued at the principal amount of the PPP loan.
[1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20200430b.htm
[2] https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200430b1.pdf