Small Business Administration Clarifies Eligibility Requirements of Paycheck Protection Program Applicants May 7, 2020

kpg headshot, fraud warningsSmall Business Administration Clarifies Eligibility Requirements of Paycheck Protection Program Applicants
By: Kyle P. Graham

In a prior post (see https://www.mccarthylebit.com/2020/04/28/sba-issues-fraud-warning-ppp-applicants/), I wrote about the eligibility requirements for borrowers pursuant to Paycheck Protection Program (PPP) Loans Frequently Asked Question #31, which asks, “Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?”  Subsequent to that post, the Small Business Association (SBA) has issued additional guidance expanding on its answer to FAQ #31.  This guidance clarifies who is eligible to receive a PPP loan and grants an extension to the safe harbor period during which borrowers are able to repay their loans without penalty.

Frequently Asked Question #37, published April 28, 2020, asks, “Do businesses owned by private companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?”  The SBA’s answer simply states, “See response to FAQ #31.”  Thus, it appears that the SBA intends the information contained in FAQ #31 to apply to all borrowers, and not just those large companies with adequate sources of liquidity.  The SBA has not, however, further defined what the phrase “adequate sources of liquidity” means.  As stated in my previous post, the conservative approach is to treat FAQ #31 as if it applies to every single borrower.

Additionally, Frequently Asked Question #43, published May 5, 2020, asks whether a PPP borrower can obtain an extension to repay the loan in full beyond the May 7, 2020 date specified in FAQ #31.  The SBA responded that it is extending the repayment date for this safe harbor to May 14, 2020, and borrowers do not need to apply for this extension.  The SBA will promptly implement this extension through a revision to the SBA’s PPP final interim rule.

Kyle Graham is an attorney at the Cleveland, OH-based law firm McCarthy, Lebit, Crystal & Liffman.

 

While we would be thrilled to work with all individuals, institutions and companies that read our advisories, we  want to clarify that these insights do not form a lawyer-client relationship and represent only general guidance without access or reference to all of the specific facts and circumstances.  If you do wish to engage McCarthy Lebit on a specific matter, please contact us by calling 216-696-1422 or by filling out an inquiry form located here.  If you are already a firm client, please contact the McCarthy Lebit attorney you work with to discuss these advisories and/or the nature of your concern.  In closing, please understand that the law, especially during this pandemic, is changing rapidly and we would recommend that you regularly contact your legal counsel to ensure that your actions are taken based on the most up-to-date versions of the laws.

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