On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act was signed into law and provided an additional $310 billion for the Paycheck Protection Program (PPP). The Small Business Administration (SBA) resumed accepting PPP loan applications on April 27, 2020. In light of the quick exhaustion of initial PPP loan funds, eligible businesses should apply for PPP loans soon to increase the likelihood of receiving available funds.
The SBA has also provided additional guidance for entities applying for loans.
- On April 24, 2020, the SBA published the Interim Final Rule on Requirements for Promissory Notes, Authorizations, Affiliation and Eligibility. This is the fourth Interim Final Rule published by the SBA regarding PPP. The most notable provision from the fourth Interim Final Rule is the SBA’s clarification that hedge funds and private equity firms are not eligible for PPP loans. The fourth Interim Final Rule also states that businesses involved in bankruptcy proceedings are not eligible for PPP loans. Additionally, in the event that an applicant becomes a debtor in a bankruptcy proceeding prior to PPP funds being disbursed, the applicant must notify the lender and request cancellation of the application. Failure to take such action will be regarded as use of PPP funds for unauthorized purposes.
- On April 26, the SBA updated its Answers to Frequently Asked Questions about PPP to clarify that “employees” under the PPP loan application process are “individuals employed on a full-time or part-time, or other basis.” However, for purposes of calculation of loan forgiveness, only “full-time equivalent employees” are used to determine the extent the loan forgiveness amount will be reduced due to workforce reductions.
- The fifth Interim Final Rule, the Interim Final Rule on Additional Criterion for Seasonal Employers, was published by the SBA on April 27 and gives needed guidance regarding calculation of average payroll costs and eligibility for seasonal employers.
For applicants that have already received loans, and for eligible businesses that may be applying, we note that the SBA has provided very limited guidance on the loan forgiveness process. We hope to receive additional guidance on loan forgiveness in the near future.
Bradley will continue to monitor and report on the SBA’s evolving PPP guidance.
If you have any questions about the PPP or any related issues, please feel free to contact Aron Beezley, Frederic Smith, or Elizabeth Boone.