PPP Fund is Replenished, New Eligibility Guidance

Photo by Jose Fontano on Unsplash.

The Paycheck Protection Program (PPP) got a $320 billion infusion today as President Donald Trump signed a $484 billion interim coronavirus bill into law. Sixty billion dollars was also earmarked for the Small Business Administration (SBA)’s Economic Injury Disaster Loan program.

The PPP loans are designed to provide a direct incentive for small businesses to keep their workers on the payroll. The SBA will forgive the loans if all employees are kept on the payroll for eight weeks and at least 75 percent of the money is used for payroll, with the rest going to rent, mortgage interest, or utilities.

The program came under fire this week for approving loans for large, publicly traded companies in what was supposed to be a source of relief for small businesses. The SBA issued stricter guidance on Thursday aimed in part at these larger companies and clarifying eligibility requirements. It also pressured these larger, public companies to return the funds, saying: “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.”

Within the new guidance, SBA statements also include:

On large companies: “Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”

On affiliates applying for loans: “Under the CARES Act, any single business entity that is assigned a NAICS code beginning with 72 (including hotels and restaurants) and that employs not more than 500 employees per physical location is eligible to receive a PPP loan.”

On those who have already applied: “Borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in these FAQs.”

According to USA Today, $60 billion of the new funding is to be set aside for community-based lenders, smaller banks, and credit unions to assist smaller businesses in an effort to address some of the inequalities that have been criticized.

If you’re interested in applying for a PPP loan and haven’t already submitted an application, you should apply now!

—Ashley Bray