This client alert serves as an update as we continue to track the developments in the implementation of the Paycheck Protection Program (the “PPP”), an SBA-guaranteed loan program promulgated under the CARES Act, and certain other federal stimulus packages. For more information on the PPP, please see the webinar we hosted with the Association of Corporate Counsel and our prior client alerts (PPP Update April 9 & PPP Update April 3).
The SBA announced that all funding allocations under the PPP were committed on April 16, 2020. However, as described below, further appropriations have now been authorized under bipartisan legislation that was passed on April 23, 2020, pending White House approval.
The material features of this legislation applicable to the PPP and the SBA's Economic Injury Disaster Loan (“EIDL”) program are summarized below:
- Increased Appropriations: The size of the PPP was increased to $659 billion (a $310 billion increase), while appropriations were increased to $670.3 billion (the difference accounts for certain fees payable in accordance with the PPP). In addition, authorization for EIDL grants was increased from $10 billion to $20 billion.
- Expanded Eligibility: Agricultural enterprises with not more than 500 employees are now eligible. Note that SBA affiliation rules apply to these entities.
- Set-Asides: The following lender-specific set-asides are mandated by the new law:
- At least $30 billion in loans must be issued by insured depositary institutions with consolidated assets between $10 billion and $50 billion (note that there appears to be a typo in the sizing requirements set forth in the revised rules).
- At least $30 billion in loans must be issued by community financial institutions (minority depositary institutions, certified development companies, microloan intermediaries and state and federal credit unions), insured depositary institutions with consolidated assets less than $10 billion, and credit unions with consolidated assets less than $10 billion.
- Hospital and Health Care Funding and COVID-19 Testing:
- In addition to augmenting the PPP, the new legislation provides $75 billion to reimburse hospitals and healthcare providers for COVID-19 related expenses and lost revenue. This is in addition to $100 billion provided in the CARES Act.
- An additional $25 billion to cover necessary expenses to research, develop, validate, manufacture, purchase, administer, and expand capacity for COVID-19 testing, including up to $1 billion to cover costs of testing for the uninsured.
- Requires States, localities, territories, and tribes to develop plans on how resources will be used for testing and easing COVID-19 community mitigation policies.
- Requires a national strategic plan to assist States in increasing testing capacity, a crucial step to allowing States and sectors of the economy to reopen safely in the weeks and months to come.