Today, the President signed into law a $310 billion second round of funding for the Paycheck Protection Program (“PPP”), $50 billion for emergency disaster lending, and $10 billion in Small Business Administration (“SBA”) disaster grants. The SBA is expected to begin taking loan applications again next week.
In the first round of funding, many large public companies applied for and received relief funds through the PPP, leaving thousands of small businesses without funding. However, this new round of funding coupled with the changes described below will help small businesses get a second shot at getting their PPP loan approved. It is expected, this second round of funding will be quickly depleted as well, and no other funding is guaranteed after it is exhausted.
The new rule by SBA requires companies applying for relief funds to certify that: (i) the PPP loan is necessary in good faith and (ii) the company does not have other sources of funding. The SBA’s stricter guidelines should allow additional money to be available for true small businesses. It would be difficult for a large publicly-traded business to argue it has no other source of funding. Furthermore, companies who received funds through the PPP before this rule change can avoid scrutiny by returning money by May 7, 2020 if they do not meet the new requirements. If they repay the loan in that timeframe, they will be held to have complied with the certification in good faith.
If you have further questions, for more information please see: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf