The NAHB said that the SBA has imposed a pre-existing regulation and guidance document that limits eligibility for certain businesses, including “passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds,” and “speculative businesses” that include “building homes for future sale.”
In a statement issued yesterday, the NAHB said the PPP program is essentially hurting builders.
“NAHB members across the nation have been prevented from seeking PPP funds because of SBA’s regulations. Those members who did receive funds faced widely inconsistent experiences. Moreover, those members who have received PPP loans may find it difficult to have those loans forgiven.”
Additionally, the NAHB said that the SBA is using an “unlawful bait-and-switch” tactic toward the residential housing industry, along with inconsistent eligibility rules.
“While some lenders noted SBA’s eligibility rules and declined to issue loans to excluded businesses, other lenders did not enforce these rules and extended loans to businesses deemed ineligible by SBA,” the NAHB said. “These small businesses – including many home builders – applied for these loans in good faith and now fear their loans will not be forgiven because they may have been ineligible under SBA rules.”
“These small businesses, and many others, applied for and received PPP loans under the good-faith belief they were eligible for loan forgiveness,” the lawsuit states. “They have since learned that, despite receiving loans and using the proceeds to keep their employees off unemployment, they are unlikely to receive loan forgiveness because, under the Exclusion Rule, they might not have been ‘eligible’ for the loans in the first instance.”