First: Friday, April 10 opens the window for independent contractors and self-employed persons to apply for the Payroll Protection Plan ‘forgivable’ loans under the recent CARES Act. Since this is a ‘first come, first served” Program, the sooner the better. However, in view of the high demand for this Program the President and Congress are discussing adding another $250 billion to it, which remains to be determined.
The current PPP loan application form can be found here: http://ow.ly/kUf550zam6m. As before, it’s only 2 pages, the essential instructions are less than a page, and the estimated time to complete it is only 8 minutes.
In the past few days more guidance on this Program has been issued by the U.S. Small Business Administration. Go to: http://ow.ly/uYVQ50zam9W
Six pages of frequently asked questions (as of April 8) can be found here: http://ow.ly/uXyb50zamcX
The SBA has also issued an “Interim Final Rule” which provides guidance on many of the PPP topics. It’s 31 pages, mostly in questions-and-answer format, and can be found at http://ow.ly/BFDZ50zamg8. Many of those topics are for lenders, but they provide insight into what the lenders will be looking for when reviewing the loan application.
If a business has stock ownership, overlapping management, identity of interest, or other characteristics in common with another business, the “affiliation” rules for the PPP should be consulted, at http://ow.ly/c5h150zamiD
However, one aspect of the application that’s not been clarified is the required certification that: “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” There does not yet appear to be guidance as to what “necessary”, “support”, and “ongoing operations” mean in this context. Clearly, if a business would be forced to close – either temporarily or permanently – without the loan, then the loan is needed – but may not be sufficient – to keep the doors open. For example, if the business is subject to a governmental closure order – as are many retail and food service businesses – it might not have “ongoing operations” anyway, even if it receives the loan. In making this determination, the primary purpose, intent, and operation of the Payroll Protection Program – to provide and restore paychecks to employees the same as before the shutdowns and layoffs due to the coronavirus crisis – should be taken into consideration.
Numerous reports say that there are multiple administrative difficulties and delays in applying for, tracking, and obtaining approvals for the PPP loans. The SBA says that it is working on addressing those issues. For example, some banks are only taking applications from businesses that already have a loan account and/ or a checking account with that bank. Persons having difficulty finding a bank to take their application should consult the SBA’s webpage listing participating banks at http://ow.ly/OT1z50zamkf
Another SBA program that may be helpful is the Economic Injury Disaster Loan (“EIDL”). A brief comparison of it and the PPP can be found at http://ow.ly/gNar50zamow
If you have questions about or would like to discuss how these programs may be of help to you, contact the attorneys at Zator Law.