Revisiting agent fees for SBA EIDL and PPP loans

While I twiddle my thumbs waiting for the IRS to update the Collection Financial Standards so I can report on it, and while you wrap up tax season over the next 11 days (because you should be blatantly ignoring the May 17 nonsense), let’s not forget about the PPP and EIDL loan worlds.

As you may have heard, the application period for PPP loans has been extended through May 31, with processing extended to June 30. So, plenty of time for your clients to get in both their first and second draw applications if they haven’t already done so.

EIDL application deadlines are always specific to each disaster declaration. For the ‘rona ‘saster, the application deadline is currently December 31, 2021. If your area has been impacted by recent winter storms, hurricanes, fires, floods, tornadoes, civil unrest, earthquakes, drought… Yikes, what a downer… Here, just search the SBA disaster declaration list yourself. There are literally 999 active disaster declarations across the country. Each local disaster declaration will have it’s own application period for EIDL and other relief that your clients might be eligible for.

Ya’ know what, after that depressing paragraph, I hereby interrupt this email to insert some random cuteness…


OK, much better!

As I was saying… There is still plenty of opportunity for you to be the hero and help your clients that need it to obtain these loan funds. But, there’s a catch to being an accountant and helping with SBA loan applications. I wrote about this extensively a year ago, but it’s worth revisiting now as the PPP winds down.

Last year about this time, I was annoyed to learn that some accounting “guru” out there was not only instructing tax and accounting professionals to charge an up front fee for completing the PPP loan application for their clients, but to also charge a back-end contingency fee based on the approved loan amount. This “guru” was setting people up for a visit from an SBA Special Agent (yes, the SBA has law enforcement personnel).

Here is the super-short version of what you need to know about fees in relation to SBA loans:

  1. It is a violation of SBA regulations for you to charge any fee in connection with an SBA 7(a) loan application. PPP loans are 7(a) loans.
  2. It is a violation of SBA regulations for anybody to charge a contingency fee in connection with any SBA loan program, including 7(a) and 7(b). The Economic Injury Disaster Loans (EIDL) are 7(b) loans.
  3. You can charge a fee in connection with a 7(b) loan, but it must usually be disclosed, and there are other rules surrounding it. Those rules are summarized on SBA Form 159D and can be found in the Code of Federal Regulations here.
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It’s obviously important for you to be helping your tax and accounting clients with these programs right now. But as with all things when dealing with regulatory agencies, there are rules we need to follow.

If you are helping new clients with their PPP loans, there is a way for you to get paid. Basically, the lender (the bank) has to pay you out of their lender fee. There are caps on these agent fees, and the reality is that very few lenders have actually agreed to share these fees with accountants, because they’re not required to. Dozens of accounting and law firms have sued banks over this during the past year, and the banks have so far won every single one of these lawsuits. The December stimulus package even codified this and backdated it to March.

So, you can get paid, but you need to have a written agent fee agreement in place with the bank before the loan application is submitted. Which means it ain’t gonna happen.

So, to reiterate:

PPP Loan: You cannot charge a direct fee to fill out the application for a client — period.
EIDL Loan: You can charge a direct fee for assisting with the loan application — with rules. See the Form 159D. If you charge a business more than $2500 for the application, you must complete the 159D and submit it to the SBA along with an itemization of the services performed for the fee.
Contingency Fee: Never — period.

I was thoroughly disappointed in the AICPA last year when they gave their members a vague and squirrely answer in reply to questions about agent fees, especially when the SBA rules on this are very straightforward. Shame on you, AICPA. Even the dog up above can read.

Probably the most important thing to understand about SBA rules is their definition of an agent. If you directly fill out the SBA loan application for a client, or help them with filling it out, you’re acting as an agent. If somebody hires you anew to produce financial statements or tax returns required in support of an SBA loan application, you’re acting as an agent.

Read that last sentence again.

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Go ahead, I’ll wait.

Stated a different way: If it’s a brand new client, and they’ve hired you to do accounting or tax work specifically in support of an SBA loan application, you’re defined by the SBA as an “agent”. For a PPP loan, you cannot get paid directly for that work — the bank has to pay you (and they won’t). For an EIDL, you can charge a fee, but need to submit the Form 159D if it’s over $2500 for a business (or $500 for an individual in relation to their home).

Do you see the key to the whole thing? New client, and service specific for the loan.

Now, if you’re the normal, regular accountant for the business, then you’re just doing your normal, regular work for the client. It’s not specific to the loan application.

So, it’s OK to bring in new clients. It’s always perfectly fine for a small business to hire you as their new, regular accountant. Get that in writing through an appropriate engagement letter. Generate regular monthly invoices. All that jazz. Document the heck out of it just in case — highly unlikely that it will ever happen, but just in case — an SBA Special Agent ever knocks on your door.

If you think about it, you don’t really want to be doing one-off work for PPP and EIDL applicants, anyway. You want them to be regular, long-term clients. Therefore, make it so. This is best for the client, and best for the long term profitability of your practice.

With all that said, I’m abruptly going to change the subject. If this is the year that you’re finally going to start offering taxpayer representation services — and you should — then you’ll want to attend our upcoming 1-day virtual introductory boot camp. It’s 7 hours of CPE, and it’s only $199. Get all the details on our Eventbrite page: