The SBA and the US Treasury Roll Out New Guidance Just as the Paycheck Protection Program Runs Dry

Lenders, small businesses and their financial and legal advisers have scrambled to keep up with the almost daily release since April 1 of the Small Business Administration’s Paycheck Protection Program “Interim Final” Rules, the also-final updates to the Rules, and the also-binding guidance documents, in addition to new requirements for the Program issued under the guise of “guidance” by the United States Department of the Treasury. Updates to and clarifications of the Program’s requirements were issued as recently as yesterday. But now, only 13 days after the PPP opened, it appears the $349b fund has been exhausted. See here and here for press reports on the depletion of the fund. It is thought that Congress may supply more funding, but nothing is yet certain.

The SBA-backed PPP, desperately needed by small businesses grappling with COVID-19’s squeeze on the nation’s commerce, was drafted with broad eligibility requirements intended to throw open the doors to small businesses across the spectrum. It did, and businesses raced to their banks to participate. According to Bloomberg News, more than 1.4 million applications have been approved since the launch, earmarking approximately $305 billion in largely forgivable loans to help struggling enterprises. It is likely, however, that the sprint favored the more established businesses that already had relationships with SBA-approved lenders and ready access to legal counsel to help them navigate complex and rapidly unfolding program. Without question, those businesses were in need. But smaller concerns unaccustomed to accessing SBA loan programs and without legal and financial advisers in place may not have been nimble enough to benefit from the rescue package.

It is with some optimism — or hope — that more funding will revive the program that I want to share an update drafted by my colleague Catherine Burke, who highlights some of the most recent PPP guidance: here.

The links below will also take you directly to several of SBA and US Treasury documents.

An accessible 2-page fact sheet on the PPP

The SBA Interim Final Rule

The SBA Rule on Affiliations for PPP Loans Only

The SBA Rule on Eligibility – Sole Proprietors and Partnerships, in particular, should look here.

Treasury FAQs on the PPP

If your business was unable to benefit from the first round of the PPP, you may wish to consider applying for one of the other loans or exploring tax relief or other benefits provided under the CARES Act. See here for information on the Economic Injury Disaster Loan.

**April 17, 2020 UPDATE** The SBA reports that the EIDL fund is also depleted. We now have to watch Congress in the hope they will top up funding.