Updates to (and Re-Funding of) the Paycheck Protection Program
Today, President Trump signed the Paycheck Protection Program and Healthcare Enhancement Act into law, providing further aid to small businesses. Yesterday, the Small Business Administration (“SBA”) also issued further guidance to businesses applying for PPP loans.
Here are three things small businesses should know about these recent updates to the Paycheck Protection Program (“PPP”):
- The Paycheck Protection Program and Healthcare Enhancement Act injects an additional $310 billion into the SBA 7(a) loan program which includes PPP Loans created under the CARES Act. Layered on top of the $350 billion in original funding in the CARES Act, this nearly doubles the amount of funding to support small businesses. The new funding is being provided on effectively the same basis as the original– see our article here summarizing it: https://www.newmeyerdillion.com/publications/the-paycheck-protection-program-loans-may-offer-relief-to-small-businesses-as-part-of-the-cares-act/.
- If your small business already applied for a PPP loan and your lender has accepted your loan application pending additional funding, you do not have to re-file. If you have not yet filed for the PPP Loan you should submit your application to your lender as soon as possible. The first round of funds exhausted rapidly, so fast action is essential.
- SBA cautioned that businesses are required to certify in good faith that the current economic uncertainty makes this loan necessary to support the business’s ongoing operations. Small businesses should take into account their ongoing operations and ability to access other sources of funding before applying for PPP loans. Yet, such businesses can still apply for PPP loans where accessing these other sources of funding would be significantly detrimental to the business.
SBA especially cautioned larger, public companies with substantial market value when applying for PPP loans. These companies should be prepared to demonstrate their need for these funds. Such companies could be subject to civil or criminal liability if they falsely certify that they need the loan to support their ongoing operations due to the economic uncertainty caused by COVID-19 and shelter in place orders.
Each business is in a unique situation and this guidance applies differently on a case-by-case basis. Businesses should heed these warnings and not take their good faith certification lightly. As with any business decision, please use your best business judgment when determining your business needs and act accordingly.