Paycheck Protection Program Update – April 9, 2020

Client Alert

Client Alert
April 9, 2020

This update is the second in a series as we track developments in the implementation of the Paycheck Protection Program (the “PPP”), a $349 billion SBA-guaranteed loan program promulgated under the CARES Act.  For more information on the PPP, please see the webinar we hosted with the Association of Corporate Counsel and our prior client alerts.

Since our last client alert, we note the following updates and market observations in respect of the PPP:

  • Remaining Funds: As of around 6:50 p.m. April 8, 2020, Vice President Pence announced that approximately $98 billion in PPP loans had been disbursed.  This figure is significantly lower than expected, as some market commentary suggested that all funds under the PPP would be disbursed this week.

  • Additional Treasury FAQ: The SBA has issued additional guidance for lenders with respect to the PPP, which is available here.  A few critical takeaways:

    • Borrowers are responsible for determining the applicability of the SBA’s affiliation rules, and the SBA’s affiliation rules apply unless expressly waived under the PPP regulations.

    • Businesses that meet the SBA’s “alternative size standard” as of March 27, 2020, are eligible for PPP loans irrespective of headcount (alternative size standard: (1) maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million).

    • If a loan application is in a state where registration laws require wages and other data to be reported on the Employer Identification Number of a payroll provider, documentation from the payroll provider is acceptable for purposes of documenting wages and payroll taxes reported to the IRS.

    • Lenders are given significant discretion with respect to the form of closing documents for PPP loans and are not required to use the forms prepared by the SBA.  Data must still be sent to the SBA on the SBA’s interface. 
 

This information is intended to inform our clients and other friends about legal developments, including recent decisions of various municipalities, legislative, and administrative bodies. Because of the rapidly changing landscape related to COVID-19, we intend to send out regular updates. The information we provide is not intended as legal advice and viewers/readers should not rely on information contained in these materials to make business or legal decisions. Before making any legal decisions, consult your lawyer. Please do not hesitate to contact us should you need assistance responding to the many issues which have arisen, and will continue to arise, out of this situation.

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Andrej Micovic

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