Nanette Heide – Project Development/Infrastructure/P3

May 29, 2020June 11, 2020 by Brad A. Molotsky

COVID-19: New PPP Flexibility Act passed in the House of Representatives which focuses on Small Businesses, Hospitality and Restaurants

The new Paycheck Protection Flexibility Act (H.R. 7010) which focuses on small businesses and restaurants in particular has passed the House of Representatives.

The bipartisan Paycheck Protection Flexibility Act, was introduced last week by Reps. Dean Phillips, D-Minnesota and Chip Roy, R-Texas, and, is designed to extend the 8-week period under which loan recipients could spend the PPP money to 24 weeks while helping correct other provisions that would provide more flexibility to small businesses in the hospitality realm.

Many hospitality businesses have high overhead costs and low worker salaries, and, as such, will likely struggle to rehire their employees as their businesses have not reopened yet or, if they have reopened, have reopened with a smaller staff due to social distancing requirements for their customers. Additional challenges are presented as some former employees are seeing more income from enhanced unemployment benefits which will also make it difficult to rehire them.

A bipartisan group has already introduced a companion bill in the Senate. Its backers include Sens. Cory Gardner, R- Colorado, Tim Kaine, D-Virginia, Thom Tillis, R-North Carolina, Steve Daines, R-Montana, Angus King, I-Maine, and Debbie Stabenow, D-Michigan.

The Paycheck Protection Flexibility Act would:

• Extend the “covered period” under which small businesses can spend the loan proceeds from 8 weeks to 24 weeks or until Dec. 31, 2020.

• Expand the 25% cap to use PPP funds on non-payroll expenses, such as rent, mortgage interest and utilities, to 40% of the total loan. Currently, small businesses must use at least 75% of the loan for payroll expenses to get maximum forgiveness, but under the bill that would change to 60% to get maximum forgiveness.

• Give small businesses more time to rehire employees or to obtain forgiveness for the loan if social distancing guidelines and health-related actions from the CDC or other agencies prevented the business from operating at the same capacity as it had before March 1.

• Allow small businesses to take a PPP loan and also qualify for a separate, recently enacted tax credit to defer payroll taxes, currently prohibited to prevent “double dipping.”

• Remove the limits on loan forgiveness for small businesses that were unable to rehire employees, hire new employees or return to the same level of business activity as before the virus.

• Extend the loan terms for any unforgiven portions that need to be repaid from 2 years to 5 years, at 1% interest.

• Extend the period for when a business can apply for loan forgiveness, from within 6 months to within 10 months of the last day of the covered period, before it must start making interest and principal payments. Under the new bill, PPP loan interest and payment of principal and fees will be deferred until the loan is forgiven by the lender.

Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

For Further Information:

If you have any questions about this post, please contact Brad A. Molotsky, Sandra Stoneman and Nanette Heide or the attorney in the firm with whom you are regularly in contact.

Be well and stay safe!

May 13, 2020 by Brad A. Molotsky

COVID-19: SBA issues new Guidance on PPP Loans – Deemed Good Faith Certification Safe Harbor for Certain Loans

Earlier today, the SBA released FAQ 46 to its existing FAQ fact sheet, which addresses how the SBA will review borrowers’ required good-faith certification concerning the necessity of their PPP loan applications.

The full text of FAQ 46 can be found at https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf)

46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.

The SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

For Further Information:

If you have any questions about this post, please contact Brad A. Molotsky, Nanette Heide, Sandra Stoneman or the attorney in the firm with whom you are regularly in contact.

Be well and stay safe!

May 5, 2020May 14, 2020 by Brad A. Molotsky

COVID-19: Treasury Extends Safe Harbor for the Return of PPP Dollars to May 18, 2020

By update to their Frequently Asked Questions, on May 14, 2020, the US Treasury added a new question 47, which extended the “safe harbor” repayment date for PPP loans from May 14 until May 18, 2020.

For the entire set of FAQs – see https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

For Further Information:

If you have any questions about this post, please contact Brad A. Molotsky, Nanette Heide, Sandra Stoneman or the attorney in the firm with whom you are regularly in contact.

Be well and stay safe!

April 18, 2020April 20, 2020 by Brad A. Molotsky

Overview of Federal and State COVID-19 Relief Programs for New York

In response to the COVID-19 pandemic, federal, state and local governments, through both legislative and executive action, have enacted or ordered a broad array of financial measures to mitigate the adverse economic effects experienced by businesses and nonprofit entities.

To read the full text of this Alert, which will identify and explain the economic programs established by the federal government, New York state and New York City to help businesses in New York that are experiencing financial loss due to COVID-19, please visit the firm website.