UPDATE AS OF MAY 5, 2020 - SBA EXTENDS SAFE HARBOR TO MAY 14, 2020 AND PROMISES FURTHER GUIDANCE PRIOR TO THEN
The SBA FAQ PUBLISHED April 6, 2020, (https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequenty-Asked-Questions.pdf) clarifies several issues for which many small businesses and their advisors have been seeking guidance.
On April 2, 2020, the SBA issued an "Interim Final Rule" providing interpretations and guidance for loans under the Payroll Protection Program ("PPP"). The interim rule is effective immediately despite the fact that the SBA will continue to take comments for 30 days. This is a first come, first served program that will continue until the earlier of June 30, 2020, or until the funds are exhausted. Secretary Mnuchin has indicated the President will request additional funds if the initial $350 billion is over-subscribed. Read more. Changes to PPP in SBA's Interim Final Rule.docx
On Thursday, April 2, 2020, the U.S. Small Business Administration (SBA) issued an Interim Final Rule (IRF), which constitutes the much-anticipated "Regulations" called for in the CARES Act on implementation of the Paycheck Protection Program (PPP). While the IRF is considered "interim" and requests public comments over a 30-day period, it is anticipated that lenders will rely on it once they begin accepting and processing applications for those small businesses seeking PPP loans. We previously explained the program in our blog post found here.
On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. Our separate post outlines the Paycheck Protection Program ("PPP"), which is administered by the U.S. Small Business Administration (SBA), and is a distinct component of the Act. Inherent to the PPP (and other SBA loans modified by the Act), is the question of "affiliation" as it pertains to businesses, their owners, and their parent and subsidiary entities and affiliations. Importantly, the SBA's size and affiliation rules are broader than most common understandings of the affiliation concept in other aspects of the law and will play a pivotal role in determining whether or not a particular business may be eligible for a PPP (or other SBA) loan under the CARES Act.
The Paycheck Protection Program provides approximately $350 billion for a temporary supplement to the SBA's current loan program through which SBA-approved banks are authorized to make loans to qualifying eligible entities. The PPP has three key components:
UPDATE: On March 31, 2020, the Small Business Administration and the U.S. Treasury released the Application Form for the new SBA PPP Loan forgiveness program, which we have included at the end of this article.
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