On April 2, 2020, the Small Business Administration issued its first formal guidance on the Paycheck Protection Program (“PPP”) portion of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that was signed into law last week. This guidance provides clarity on several aspects of the PPP loan program, which has started accepting applications today. Congress and the Treasury Department are also moving towards a solution to the so-called “affiliation rule” problem that is impacting the eligibility of certain venture- and private equity-backed businesses for PPP loans.
On April 2, 2020, the Small Business Administration (SBA) issued its first formal guidance on the Paycheck Protection Program (PPP), a critical component of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was signed into law last week. This guidance provides much-needed clarity on several aspects of the PPP loan program, which began accepting applications today.
The PPP is designed to provide financial relief to small businesses affected by the COVID-19 pandemic by offering loans that can be used for payroll costs, rent, utilities, and other essential expenses. One of the key features of the PPP loans is that they may be forgiven if businesses meet specific criteria, such as maintaining their workforce levels and using the loan proceeds for eligible expenses.
Key highlights from the SBA’s guidance include:
- Eligibility Requirements: Clarification on which businesses qualify for PPP loans, including specific size standards and other criteria.
- Loan Amount Calculation: Detailed instructions on how businesses can calculate the maximum loan amount they are eligible to receive based on their payroll costs.
- Loan Forgiveness: Information on the conditions under which PPP loans can be forgiven, emphasizing the importance of maintaining employee headcount and allocating loan funds to approved expenses.
- Application Process: Guidance on how to apply for PPP loans, including necessary documentation and timelines for submission.
In addition to the SBA’s guidance, Congress and the Treasury Department are actively working towards resolving the “affiliation rule” issue that has impacted the eligibility of certain venture- and private equity-backed businesses for PPP loans. This rule, which considers the ownership and control relationships between companies, has raised concerns for businesses with complex ownership structures. Efforts are underway to address these concerns and ensure that a broader range of businesses can access the much-needed financial support provided by the PPP.
For further details on these important developments and how they may affect your business, please refer to our Client Alert. Our team at Gesmer Updegrove LLP is committed to providing timely and relevant information to help our clients navigate these unprecedented times.