Update on Small Business Loans and Grants Under the CARES Act
New Funding for Paycheck Protection Program and EIDL Grants
On Friday, April 24, 2020, President Trump signed into law a new bill providing an additional $310 billion into the Paycheck Protection Program (PPP). The PPP was originally funded with $349 billion, but those funds were exhausted by April 23, 2020. The new bill provides that $60 billion of the additional funds are allocated for smaller lenders including community banks and community development financial institutions. These funds are not specifically set aside for underserved or disadvantaged businesses, but rather for the lending institutions that serve these markets.
The new bill further provides an additional $10 billion for grants under the Economic Injury Disaster Loan provisions of the CARES Act (EIDL). Agriculture Enterprises were also added as a type of entity which may be eligible for an EIDL grant.
New Guidance on Borrower Certification for a PPP Loan
On Thursday, April 23, 2020, the Treasury Department added the following question and answer to its FAQ publication relating to the certification a borrower must provide regarding the need for a PPP loan:
Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?
In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. 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.
Lenders may rely on a borrower’s certification regarding the necessity of the loan request. 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. (Emphasis added)
New Guidance on Paycheck Protection Loans for Farmers and Ranchers
On April 26, 2020, the Treasury Department added questions and answers to its FAQ document stating that agricultural producers, farmers, and ranchers are eligible for Paycheck Protection Loans if: (i) the business has 500 or fewer employees, or (ii) the business fits within the revenue-based sized standard, which is average annual receipts of $1 million.
Additionally, agricultural producers, farmers, and ranchers can qualify for PPP loans as a small business concern if their business meets SBA’s “alternative size standard.” The “alternative size standard” is currently: (1) maximum 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. For all of these criteria, the applicant must include its affiliates in its calculations
If you are interested in reviewing the FAQ updates from the Treasury Department, you may click on this link. If you have any questions, please feel free to contact our office at 402.492.9200 or email any of our attorneys. Updated April 27, 2020.
Mon Apr 27, 2:30pm Share