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.
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…
As we continue to revise and update our Comparison of Economic Support Measures being introduced by governments around the world to address the impact of the COVID-19 pandemic, we are starting to see some key trends emerge. In our most recent update, published today, we observe:
- an increase in measures designed to protect those sectors
Today, the US Small Business Administration (SBA) provided further guidance for PPP loan applicants in FAQ #37, which states:
- Question: Do businesses owned by private companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?
Answer: See response to FAQ #31.
Beyond potentially excluding private companies (in addition to public companies under the SBA’s prior FAQ #31) with “adequate sources of liquidity,” the SBA offers no meaningful guidance regarding such “adequacy” or “sources” or even regarding what might constitute such “liquidity.”
Mayer Brown’s COVID-19 Global Response Team has launched two new tools on its COVID-19 portal, the Back to Business Navigator and the Global Stimulus Navigator, to help companies navigate the myriad legal issues across jurisdictions that most affect their business.
The gradual process of reopening the economy and businesses by lifting government-mandated stay-at-home…
In FAQ #31 posted on April 23, 2020, the US Small Business Administration offered the following clarification (italics added):
31. Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?
Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all…
After $349 billion in paycheck protection program (“PPP”) loans were exhausted in just 13 days, the U.S. Senate today enacted legislation to provide additional funding for the program, including at least $60 billion set aside for smaller banks and lenders. The legislation does not alter the general eligibility, affiliation, forgiveness, repayment and loan requirements; but merely provides additional funding.
Specifically, the legislation increases PPP funding by $310 billion, including $250 billion accessible to all eligible lenders and borrowers, $30 billion set aside for loans made by Insured Depository Institutions and Credit Unions with consolidated assets between $10-$50 billion, and an additional $30 billion set aside for loans made by Community Financial Institutions, Small Insured Depository Institutions and Credit Unions with consolidated assets under $10 billion.
Successive governments have announced a plethora of mechanisms to support businesses though the effects of COVID-19. To date, this has been done primarily on a country-by-country basis, leading to an array of different schemes across the EU and in other jurisdictions.
This is a summary of the economic support mechanisms currently available in various jurisdictions…