Can a bank make an SBA PPP loan to an applicant of which an outside director of the bank or a shareholder of the bank owns a direct or indirect equity interest?

Yes, provided the applicant otherwise meets the eligibility requirements of the PPP, AND the director is not an officer or key employee of the bank and, in the case of a shareholder, the holder owns less than a 30 percent equity interest in the bank. On April 20, 2020, the SBA issued an interim final rule stating, among other things, that SBA lending restrictions shall not apply to prohibit an otherwise eligible business owned (in whole or part) by an outside director or holder of less than 30 percent equity interest in a PPP lender (e.g., a bank) from obtaining a PPP loan from the [bank] on whose board the director serves or in which the equity owner holders an interest, provided that the eligible business owned by the director or equity holder follows the same process as similarly situated customer or account holder of the [bank]. The rule also states that SBA lending restrictions would continue to apply to officers and key employees of a [bank], and that favoritism by a [bank] in processing time or prioritization of a director's or equity holder's PPP application is prohibited.

Interim Final Rule – Business Loan Program Temporary Changes; PPP - Additional Eligibility Criteria and Requirements for Certain Pledges of Loans http

https://www.federalregister.gov/documents/2020/04/20/2020-08257/business-loan-programtemporary-
changes-paycheck-protection-program-additional-eligibility-criteria