While the second round of Paycheck Protection Program (“PPP”) funding remains available for new applicants, the first round is about to enter a new phase—loan forgiveness. Under the PPP, up to the full amount of the loan may be forgiven if the borrower spends proceeds on eligible payroll, mortgage, rent, and utilities expenses in the eight weeks following loan origination (subject to certain limitations, including that not more than 25% of forgiveness may be based on eligible non-payroll expenses). Forgiveness will be reduced for employer reductions in headcount and for certain reductions in salaries/wages in excess of 25% for any employee making less than $100,000 on an annualized basis during the eight-week period as compared with pre-COVID-19 conditions. To facilitate the forgiveness process, the SBA has now issued a PPP Forgiveness Application (SBA Form 3508). Borrowers that plan to seek forgiveness should carefully review the form and its instructions in advance of submission to their lenders or current servicers.

Continue Reading US SBA Paycheck Protection Program (PPP) Forgiveness Application

On May 18, 2020, the US Small Business Administration (SBA) released its twelfth interim final rule (IFR #12) on treatment of entities with foreign affiliates and purporting to “clarify” its own prior “guidance” noting that:

“Some market participants have indicated that there may be uncertainty regarding whether PPP applicants must include employees of foreign affiliates in their employee counts, because SBA has previously issued guidance stating that an entity is eligible for a PPP loan if it has 500 or fewer employees whose principal place of residence is in the United States. See 85 FR 20811, 20812 (April 15, 2020).”


Continue Reading Now We Know it Was “Mud”: The SBA “Walks Back” Its Prior Rules and FAQs Regarding Treatment of Foreign Affiliates

Today, just one day before the safe-harbor deadline for returning Paycheck Protection Program (PPP) loans, SBA released new guidance (FAQ # 46) on the good-faith certification of economic uncertainty. While this new guidance does not provide the clarity that many borrowers were seeking, it appears to reduce the risks associated with this certification by adopting a new safe harbor for loans under $2 million and limiting the potential penalties for loans above $2 million.

Continue Reading New SBA Guidance May Reduce the Risks to Borrowers Making the Certification of Necessity for Paycheck Protection Program Loans

As the world begins to contemplate a post-lockdown reopening of business and society, the global insurance magazine Reactions (subscription required) turned to our COVID-19 Response Team for insight on the delicate art of returning to normalcy.

Mayer Brown lawyers interviewed for the article discuss the challenges many businesses will face as they grapple with social-distancing

The US Small Business Administration has extended the safe harbor period for PPP loan return until May 14, 2020, stated that it will provide further guidance regarding the PPP necessity certification, and added confusion regarding the employee-size standard.

In yesterday’s FAQ #43, the US Small Business Administration (SBA) stated:

  1. Question: FAQ #31 reminded borrowers to review carefully the required certification[1] on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?


Continue Reading Another Day with the Paycheck Protection Program: US SBA “Tweaks” the Rules (Yet Again)

The Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) is now available to non-bank PPP lenders to finance Paycheck Protection Program (“PPP”) loans that they originated or purchased.  While the PPPLF was previously only available to depository institutions to finance PPP loans that they originated, the Federal Reserve revised its eligibility criteria on April 30,

Non-bank lenders providing struggling small businesses a lifeline through forgivable Paycheck Protection Program (“PPP”) loans may soon have access to the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) to support their lending operations. The Federal Reserve issued a term sheet for the PPPLF on April 9, 2020, indicating its intention to provide capital to

On April 28, 2020, the SBA issued a new Interim Final Rule (“IFR”) addressing certain requirements imposed on lenders under the Paycheck Protection Program (“PPP”). The IFR clarifies how and when PPP loans must be disbursed, sets expectations regarding the reporting of PPP loans to the SBA, and identifies certain circumstances under which a PPP lender will not be entitled to its processing fee as origination compensation for PPP loans. The rule is effective immediately, though requirements related to loan reporting contemplate the SBA’s issuance of a form that is not yet available.

First, the IFR clarifies several aspects of PPP loan disbursement requirements. The IFR provides that PPP loans are single disbursement loans. It also provides that the 10-day disbursement window within which a lender must disburse loan funds normally runs from the date the lender receives a SBA loan number, but: (i) for loans not already fully disbursed, the 10-day window runs from April 28th and the 8-week forgiveness window runs from the date of the first disbursement; and (ii) the lender is not responsible for delays in disbursement attributable to a borrower’s failure to timely provide loan documentation (e.g., executing a promissory note), though loan approvals must be cancelled if required loan documentation is not submitted within 20 calendar days after approval. Moreover, it provides that amounts included in a PPP loan representing refinancing of a SBA Economic Injury Disaster Loan (“EIDL”) must be disbursed directly to the SBA, rather than to the borrower.


Continue Reading SBA Issues New PPP Rule Addressing Disbursement Requirements, Loan Reporting, and Lender Compensation

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 to provide $2.2 trillion to U.S. citizens and businesses afflicted by the COVID-19 outbreak, including $349 billion for financing “small businesses” under the Paycheck Protection Program or PPP.  Under the PPP, eligible small businesses are entitled

In statements made yesterday on “Squawk Box” on CNBC, Secretary Mnuchin said:

“I’m going to be putting out an announcement later this morning that for any loan over $2 million, the Small Business Administration will be doing a full review of that loan before there is loan forgiveness,” and regarding the Los Angeles Lakers, the