News & Resources
On October 8, 2020, the Small Business Administration “(SBA”) provided a simpler forgiveness application for PPP loans of $50,000 or less. The key simplification is that the borrower can ignore reductions in either employee headcounts or of salaries or wages!
If you are eligible to use the simpler PPP loan forgiveness form, you probably want to do so. The new 3508S application form is easy to complete. The form asks for identifying information including your business name, contact information, tax identification number, the loan number and amount.
Instead of having to show your forgiveness amount calculation as you do on the 3508EZ application form, you need to certify the following seven things:
After more than a month of silence, on the part of the SBA, they issued new FAQs on August 4, which provided some additional guidance and clarification, most of which was not borrower friendly! Below are the highlights from the new FAQs. Following the highlights is a deeper dive into specific issues addressed, relative to forgiveness for health insurance and retirement benefits and owner compensation, whether owners of a C Corporation, S Corporation, Partnership, as well as for those self-employed. The highlights are as follows:1. Scanned Copies, E-Signatures and E-Consents allowed to be used. This is intended to simplify the documentation requirement part of the forgiveness application, especially in light of the ongoing pandemic. 2. Interest is only owed on portion of loan that is not forgiven, and payments are not required to be made until SBA remits the forgiveness amount to the lender. It is expected that banks will have 90 days to review forgiveness application and, thereafter, the SBA will have 120 days to determine forgiveness and submit the proceeds subject to forgiveness to the bank. 3. Forgiveness not permitted for healthcare and retirement benefits accelerated from periods outside of the Covered Period. 4. Owner compensation limitation ($20,833, based on a 24-week forgiveness period) applies cumulatively across all businesses. This is a significant limitation as, previously, borrowers who were owners of various businesses were of the belief that the owner compensation limitation applied on a per business/entity basis!
Late Wednesday, Congress voted to extend funding for the Paycheck Protection Program (PPP), which was scheduled to end on June 30, until August 8. It was signed into law on the 4th of July. To date, the PPP has distributed over $500 billion in forgivable loans to more than 4.7 million American businesses. This extension will give many small businesses, which did not initially file for the PPP, additional time to evaluate their needs. With PPP money already running low for many borrowers which availed themselves of the funding and the ongoing spread of the coronavirus continuing threatening their business, there appears to be some consensus in Washington, as to what to do with the $125 billion that remains in the program. In recent weeks, lawmakers have been increasingly voicing support for the Prioritized Paycheck Protection Program Act (P4), which, among other things, would further extend the application deadline for PPP loans to Dec. 30, or longer. The final deadline as well as administration of P4 would be left up to the SBA. P4 would be open only to companies that have already exhausted or are about to exhaust their PPP loans. It calls for stricter eligibility requirements and creates additional carve-outs for companies hardest hit by the pandemic. Publicly traded companies would be barred from participating.
On June 22, the SBA released new Interim Final Rules (IFR) relating to Loan Forgiveness. The IFR updates prior IFRs to conform to the PPP Flexibility Act (PPPFA), specifically relating to the maturity of PPP loans, the deferral of PPP loan payments, and the PPP loan forgiveness process.
The highlights of the IFR are as follows:
1. Borrowers can file for forgiveness during the 24-week period immediately after they have spent their PPP loan proceeds on “eligible expenses.” They do not have to wait until the end of their 24-week period, which is what was originally thought under the PPPFA. As addressed in a prior Legal Beat, under the PPPFA, borrowers who received their loans on or after June 5, 2020 have a 24-week forgiveness period, while those who received the loan prior to such date, could elect, instead, an 8-week forgiveness period.
The IFR specifically provides that a borrower may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. So long as a borrower has spent all of their loan proceeds, they will be able to apply for forgiveness at any point.
This Part 5 of our bankruptcy series. So far, we have covered what you need to know if the event of bankruptcy, the premise of bankruptcy in the era of COVID-19, protecting your LLC and/or Limited Partnership, and what to do with a lease.
Many people are under the impression that they are free to form a new company at any time to cut off legal problems with an old company.
This gets into an area in the law known as “successor liability.” When a business is sold, it depends upon what was sold and whether or not the successor expressly or by implication, accepted the old company’s liability. If just the assets were sold, ordinarily the purchaser has not assumed the liabilities.