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- PPP Loan Deadline May Be Extended as SBA Issues New Rules Relating to Loan Forgiveness and Eligibility
- California Looks to Pass Legislation Concerning Business Interruption Coverage Due to COVID-19
June 29, 2020
June 22, 2020
- PPP Loan Forgiveness Application Forms Updated and Streamlined
- Nevada Division of Insurance to Disallow Policy Exclusions Related to COVID-19
- CDI Announces New Order Regarding Workers’ Compensation Premium Savings for CA Businesses Affected by COVID-19
june 15, 2020
june 10, 2020
- Note to the SBA: Debtors in Bankruptcy Are Eligible for PPP Loans
- California Modifies the Tolling of Statutes of Limitations in Civil Cases
june 8, 2020
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may 12, 2020
may 8, 2020
- Treasury and the SBA Issue Guidance Regarding the Employee Retention Credit
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- Update: Large Employers Required to Pay Coronavirus-Related Sick Leave Under New L.A. County Ordinance
may 6, 2020
- SBA Extends PPP Certification Safe Harbor to May 14
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may 5, 2020
- Update: PPP Guidance Issued by the SBA and U.S. Treasury at Odds With the CARES Act—Michelman & Robinson Files First-of-Its-Kind Lawsuit Challenging FAQs
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may 4, 2020
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april 29, 2020
- Planning for Your Employees' Return to the Workplace
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april 24, 2020
- Attention Cannabis Businesses: Hope May Be on the Horizon for Federal COVID-19-Related Relief
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April 23, 2020
april 21, 2020
- Additional Funding Is on the Way to Resurrect the PPP
- Certifying Your PPP Loan: Proceed With Caution
april 17, 2020
april 16, 2020
- Employment in the Wake of Coronavirus: EEOC and OSHA Guidance Allows Employers to Go Where They Could Not Go Before
- New Yorkers Ordered to Stay at Home Even Longer Amid the COVID-19 Crisis
- Paycheck Protection Program Funds Exhausted
april 15, 2020
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- Insurance Companies Have Been Ordered to Provide COVID-19-Related Premium Relief to Businesses and Drivers in California
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APRIL 13, 2020
- IP Deadlines and Fees Extended Under the CARES Act
- Employment in the Wake of Coronavirus: Reintegrating Your Workforce in the New Normal
APRIL 10, 2020
- You Successfully Applied for and Received a PPP Loan Under the CARES Act: Now What?
- Safer at Home Order in L.A. Extended to May 15
- Maintaining Your Trade Secrets During the Coronavirus Crisis
APRIL 9, 2020
april 8, 2020
- Congress Looks to Bolster the PPP With Another $250B in Funding
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april 7, 2020
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- Large Employers Required to Pay Coronavirus-Related Sick Leave Under New L.A. Ordinance
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- Attention Insurers: CDI Orders Mandatory Call for Business Interruption Coverage Information in the Wake of COVID-19
- DOL Is Requiring Employers to Post Families First Employee Rights Notice
March 27, 2020
- A Comprehensive Guide to Understanding Coronavirus-Related State Assistance Programs: Who is Giving What to Whom (Part II)
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March 26, 2020
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- Navigating the Coronavirus Pandemic: a Critical Business Review Checklist
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march 23, 2020
- Federal Reserve Responds Boldly to Coronavirus-Related Economic Downturn
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MARCH 21, 2020
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MARCH 19, 2020
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MARCH 18, 2020
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MARCH 17, 2020
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MARCH 5, 2020
PPP Loan Deadline May Be Extended as SBA Issues New Rules Relating to Loan Forgiveness and Eligibility
BRYAN JOHNSON, SAMUEL LICKER
JULY 1, 2020
Last night (June 30), with the deadline to apply for a loan pursuant to the Paycheck Protection Program set to expire—and with that nearly $130B in allocated funds being left untapped and on the table—the U.S. Senate passed an extension of the program to August 8. Whether the extension passes in the U.S. House of Representatives and is then signed into law is likely but remains to be seen; a House vote is pending as of this writing. In the meantime, attention continues to turn to the loan forgiveness process.
Toward that end, Michelman and Robinson reported on the streamlined loan forgiveness applications recently released by the Small Business Administration. Since then, the SBA in association with the U.S. Department of Treasury posted new Interim Final Rules (IFRs), including one relating to loan forgiveness and loan review procedures, and another concerning additional eligibility revisions. By way of this alert, M&R takes a look at the important provisions found in these IFRs which, unlike certain guidance and FAQs issued by the SBA in consultation with Treasury, have the force of law and must be followed unless and until they are overturned, struck down, or rescinded.
Q. What changes do the latest IFRs make with respect to loan forgiveness and loan review procedures?
A. The IFR found at 85 F.R. 38304 contemplates the changes made to the CARES Act and the PPP by the Paycheck Protection Program Flexibility Act (explained here), as well as the EZ and updated long-form loan forgiveness applications. Among various other things, the IFR clarifies that:
- A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan—including before the end of the covered period—once the borrower has used up all of its loan proceeds
- If a borrower does not apply for loan forgiveness within 10 months after the last day of the covered period, or if the SBA determines that the loan is not eligible for forgiveness (in whole or in part), PPP loan payments will no longer be deferred and the borrower must begin paying principal and interest
- In general, payroll costs paid or incurred during the covered period are eligible for forgiveness. A borrower can elect one of two available covered periods—either 24-weeks from the date the lender disbursed the PPP loan, or 8-weeks for PPP loans received before June 5, 2020
- There are caps on the amount of loan forgiveness for payroll costs associated with compensation paid to business owners and self-employed individuals
- Non-payroll costs are eligible for forgiveness if they were (1) paid during the covered period, or (2) incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period
- The PPP Flexibility Act specifically requires certain reductions in a borrower’s loan forgiveness amount based on cuts made to the workforce (read: full-time equivalent employees) or employee salary and wages; however, this is subject to an important statutory exemption for borrowers that have eliminated these reductions on or before December 31, 2020
Q. What changes do the recent IFRs make concerning PPP eligibility?
A. Whether or not the window to procure PPP loans is extended, changes regarding eligibility remain relevant, particularly to borrowers that have already received loan proceeds. As such, the IFR found at Docket No. SBA-2020-0039 is of interest. It echoes the following eligibility revisions made to the CARES Act and the PPP by the PPP Flexibility Act and other amendments:
- To the extent an applicant is ineligible for a PPP loan if that would-be borrower owns 20% or more of the equity of the applicant and is presently subject to an indictment, arraignment, or formal criminal charge in any jurisdiction, that restriction is limited to pending felony offenses only
- To the extent an applicant is ineligible for a PPP loan if that would-be borrower owns 20% or more of the equity of the applicant and is on probation or parole, that restriction is limited to individuals whose probation or parole commenced within the last five years for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, and within the last one year for other felonies
For those interested, a list of IFRs, guidance, and FAQs related to the SBA’s PPP and Economic Injury Disaster Loans (EIDLs) can be found here. Of course, if you have any questions about the SBA’s updated IFRs, or would like to participate in M&R’s “PPP Loan Analysis Program,” do not hesitate to contact us at your convenience.
We are working diligently to keep our clients up to date on coronavirus-related developments. Nevertheless, these developments are changing daily and, in some cases even hourly, so it is important that you make sure you are dealing with the most current information. That being said, this alert is not offered, and should not be relied on, as legal advice. You should consult an attorney for guidance and counsel regarding any specific concern or situation.