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Latest on Federal Assistance Programs

April 21, 2020
The Small Business Administration’s Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs provide options for small business assistance during the pandemic.

Jump to EIDL updates SBA Economic Injury Disaster Loans (EIDL)

SBA PPP Latest Updates

July 4: President Trump Signed off on Extending the PPP Application to Aug. 8

Businesses will have another five weeks to apply for funds through the Paycheck Protection Program.

Why it matters: Roughly $130 billion in PPP funding is still available. The Small Business Administration’s inspector general found in May that some rural, minority and women-owned businesses may not have gotten loans due to a lack of prioritization from the agency.

Where it stands: The SBA said that the program had approved over 4.8 million loans as of Tuesday, per the Washington Post — approximating $520 billion.

June 26: Fifth Circuit Holds that the SBA May Deny Paycheck Protection Program Loans to Debtors in Bankruptcy

The Fifth Circuit has waded into the debate on whether the SBA must make Paycheck Protection Program (“PPP”) loans available to debtors in bankruptcy, clearly answering “No.” Although the CARES Act does not discuss whether companies who have filed for bankruptcy protection are eligible to participate in the PPP, the Small Business Administration’s form to apply for PPP funds states that applicants involved in bankruptcy are ineligible.

A number of bankrupt debtors sued the SBA over this exclusion, with mixed results. Courts in Florida, Washington, New Mexico, and Tennessee found the exclusion of bankruptcy debtors from the PPP program to be unlawful. The Tennessee opinion, being Alpha Visions Learning Academy, Adv. Proc. No. 20-00071, is thorough and analytical. Courts in New York, Maryland, Georgia, and Maine found to the contrary. Before the Fifth Circuit’s decision, no appellate court weighed in.

The Fifth Circuit, in a short, three-page opinion, held that the Texas Bankruptcy Court exceeded its authority when it issued a preliminary injunction that was barred by statute against the SBA Administrator, which required the SBA to make a PPP loan available to a debtor in bankruptcy.

What does this mean for lenders? In the Fifth Circuit, the SBA’s position that bankrupt debtors may not apply for PPP loans stands. Whether other circuits follow the Fifth’s lead remains to be seen. However, even in courts where the SBA may be enjoined from barring bankrupt debtors from obtaining PPP loans, these injunctions do not necessarily translate into affirmative commands to lenders that they must make PPP loans to bankrupt debtors.

June 22: View an updated PPP Forgiveness Guide from the U.S. Chamber
The guide reflects recent substantive changes made by Congress and the administration to the PPP program to provide borrowers more flexibility. These changes include:

  • Extending the time to spend PPP funds from 8 weeks to 24 weeks;
  • Lowering the amount that must be spent on payroll from 75% to 60%;
  • Extending the deadline to restore FTEs and payroll from June 30, 2020, to Dec. 31, 2020; and
  • Setting the repayment term for loans made after June 4, 2020, at five years.

June 11: Michigan companies see more than $15.7 billion in PPP loans, according to SBA

  • As of this week, Michigan companies have been the beneficiaries of more than $15.7 billion from more than 1114,000 PPP loans.
  • There is around $135 billion in funding still available. 

June 8: The Federal Reserve Board on Monday expanded its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The Board lowered the minimum loan amount, raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term to five years, providing borrowers with greater flexibility in repaying the loans. The Board expects the Main Street program to be open for lender registration soon and to be actively buying loans shortly afterward. Learn more.

June 3: The U.S. Senate passed U.S. House-approved changes to the PPP that will allow small businesses more flexibility in using the rescue loan funds. The Bill is now headed to the President to be signed into law.

  • The bill, H.R. 7010, would instead require that 60 percent of a loan be used on payroll, instead of the 75% that was originally required to receive forgiveness. This allows more of the loan to go towards rent or other operating expenses.
  • This bill extends the timeframe where the proceeds of the loan must be spent from eight weeks to 24 weeks or the end of the year, whichever comes first. For example, if a business received a PPP loan when SBA first started issuing them back in April, their eight week period started last week, but they now have until mid-September to utilize the entire amount of their PPP loan.
  • Next, employers now have the 24 weeks or until the end of the year, period to rehire or restore their workforce levels and wages to the level prior to the pandemic for full forgiveness of the PPP loan. The previous deadline was June 30th. There are now two exceptions to this rule; the employer is exempt if they could not find qualified employees or were unable to restore business operations due to operating restrictions.
  • The period for repaying the loan has been extended from two years to five years with the interest rate remaining 1%.
  • Lastly, businesses that have a PPP loan can delay payment of payroll taxes. The CARES Act prohibited this.

PPP Loan Forgiveness:

As of June 3, about $135 billion remains from the second round of $320 billion that Congress approved for PPP. 

May 29: More than $100 billion in PPP funds remains available. Learn more.

May 28: The U.S. House voted to make coronavirus-related small business loan programs more flexible including more time to spend and repay funds, the ability to spend more on rent, and less on the payroll. The Bill is expected to be voted on by the U.S. Senate next week. Learn more.

May 23: The Small Business Administration reported that 4.4 million PPP loans have been approved for a grand total of more than $511 billion. There are around $138 billion in appropriated funds under PPP that have yet to be deployed; 79% of the loans are under $100,000.

May 21: The SBA issued additional comments on the loan forgiveness process for both entrepreneurs and banks. This new round of guidance gives more clarity and leaves a number of questions still unanswered.

May 16: SBA issued the Loan Forgiveness Application that will be used by PPP borrowers to determine and report how much of their PPP loan will be forgiven. Read more about forgiveness application issues and answers. Download the Loan Forgiveness Application.

May 14: Previous PPP guidance from the SBA left some businesses questioning whether they would have to repay their PPP loan by May 14, 2020. Through a frequently asked question (FAQ), the SBA has issued the following safe harbor and additional guidance about how they will review the good faith certification:

  • The safe harbor provides that any borrower, who with their affiliates, that have received a PPP loan of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
  • Upon review, if the SBA makes a determination that a borrower with a loan greater than $2 million did not meet the certification on the necessity of the loan and the loan was not repaid by May 14, 2020:
    • The SBA will seek repayment of the loan
    • The SBA will inform the lender that the loan is not eligible for forgiveness
  • If the borrower repays the loan after receiving notification of the determination from the SBA, the SBA will not pursue criminal or civil penalties

The above guidance should provide some comfort to borrowers that were evaluating whether the loan should be paid by May 14, 2020. However, for those borrowers with loans greater than $2 million it is still unknown what criteria the SBA will use to evaluate if the business made a good faith certification with respect to the necessity of the loan. Therefore, we continue to recommend that borrowers carefully review and document their financial situation to meet the certification that the loan was necessary to continue ongoing operations.

What to Do Next to Get a PPP Loan?

  1. Call your bank to follow up on the status.
  2. Ask your banker, what additional information it needs to process your application.
  3. Confirm your application is in process and confirm your bank is moving it forward.

If you haven’t applied, and now your bank is no longer taking new applications: 

  1. Call community banks.
  2. The bill makes additional guarantees that a portion of the funds must be granted by smaller lenders that cater to truly small, local businesses. At least $60 billion must be granted by small banks, community financial institutions, and credit unions.

Additional Guidance to Note:

SBA Economic Injury Disaster Loans (EIDL)

The EIDL program was created to assist businesses, renters, and homeowners located in regions affected by declared disasters. The SBA has issued guidance that it will provide initial EIDL loan disbursements between $10,000 and up to $150,000.

June 15, 2020: 

  • The Small Business Administration is reopening its EIDL advance grant portal to a broader array of eligible small businesses and nonprofits affected by the coronavirus pandemic, beginning Monday, June 15.
  • The portal had been accepting applications only from agricultural businesses for the last month, as demand was high, and those businesses had not been EIDL eligible in the past.
  • Unlike the Paycheck Protection program, which businesses have the opportunity to apply to through June 30, businesses can apply to the EIDL programs through the end of the year.
  • As of Sunday, June 14, 1.43 million loans had been approved for a total of $95.6 billion through the EIDL program. The loans available under the program had been for as much as $2 million, but that number was dropped to $150,000 due to demand. The program’s emergency grant was also dropped from its initial amount of up to $10,000 per business, to $1,000 per employee, per business.