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ComplianceFinanceAugust 03, 2020

The epilogue to the SBA PPP loan program – how lenders ensured their SBA loan guarantee

And how SBA standards for digital loan compliance have shaped the future of digital lending.

The Problem: When Urgency Clouds Judgment, Lenders Placed SBA Loan Guarantees at Risk 

In the wake of the COVID-19 pandemic, the SBA dispensed $659 billion, or 14 years-worth of loans under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the subsequent Paycheck Protection Program (PPP) and Health Care Enhancement Act.

As social distancing required banks to develop new approaches to issuing these loans, remote digital lending became the de facto solution.

With an urgent demand from small businesses, lenders rushed to digitally issue SBA loans. In responding to an unprecedented loan volume and stricter regulations, lenders struggled to comply with Appendix 8 of the SBA Standard Operating Procedure (SBA SOP), as well as guidelines from the CARES Act, the Federal Reserve Board, and the Treasury Department. As a result, some lenders put their SBA loan guarantees at risk.

Digital Lending Requirements

The validity of a digital loan must be safeguarded throughout the entire loan lifecycle. As a loan advances along its lifecycle, the more risk mitigation is required.

Lenders originating Paycheck Protection Program (PPP) loans electronically were required to comply with Appendix 8 of the SBA Standard Operating Procedure 50 10 5.

These mandates required lenders to create, store, and assign digital SBA loans in compliance with three laws:

  1. The Uniform Electronic Transactions Act (UETA)
  2. The Electronic Signatures in Global and National Commerce Act (ESIGN), and
  3. The Uniform Commercial Code Section 9-105 (UCC 9-105)

The SBA further mandated that lenders conform to the Safe Harbor provisions within these laws and adhere to five additional eSignature requirements, including two-factor authentication.

Both eSignature and eVaulting Solutions Were Necessary to Meet SBA Requirements

Electronic signatures are a core component of digital loans; however, eSignature solutions are only responsible for creating the SBA digital loan.

To guarantee legal authenticity, lenders must use an electronic vault, or “eVault,” to establish an authoritative copy of a digital loan and a tamper-proof, auditable chain of custody and control. This eVault accounts for the storage and assignment of the digital loan, enabling it to be sold on the secondary market.

eSignature and eVaulting solutions for loan applications, loan closings, secondary market sales and other documents were required to comply with the SBA SOP Appendix 8 requirements.

eOriginal Makes Digital Loan Compliance and Adoption Simple

While fully understanding digital loans may be complex, implementing them does not need to be. eOriginal, the trusted leader in digital lending technology ensures Digital Asset Certainty to protect the security interest of lenders, investors, custodians and other involved parties when issuing, managing, and monetizing digital loans.

Digital Asset Certainty establishes a foundation of trust that enables fast and seamless transactions and provides assurance of digital loan compliance.

The Future of Digital Lending: An Ecosystem Built on Trust

With estimates that the global digital lending economy will reach up to $11.6 billion in five years, eOriginal is here to facilitate certainty in a market that values trust above all else.

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