Emerging Markets Law

Showing 14 posts by Christina L. Moore.

SBA Releases Interim Final Rule for PPP Loans of $50,000 or less

Posted In Coronavirus

Coronavirus

The Small Business Administration (SBA) recently released an Interim Rule that primarily affects sole proprietors.

There are approximately 3.57 million outstanding PPP loans of $50,000 or less, totaling approximately $62 billion of the $525 billion in PPP loans. Approximately 1.71 million PPP loans of $50,000 or less were made to businesses that reported having zero employees (presumably not counting the owner as an employee) or one employee.

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PPP Loans and Changes of Ownership: Considerations for M&A Transactions

Coronavirus

On October 2, 2020, the Small Business Administration (SBA) issued a Procedural Notice to provide information concerning required procedures for a “change in ownership” of an entity that has received a paycheck protection program (PPP) loan.  Prior to issuance of this Procedural Notice, the SBA regulations that govern PPP loans did not expressly address asset acquisitions/sales or even provide a detailed definition of “change of ownership” for borrowers.  Further, while most PPP loan documents required the PPP lender to consent prior to a “change of ownership,” the term “change in ownership” was not defined.  This lack of guidance and undefined language in the PPP loan documents left PPP borrowers who wanted to accomplish an asset acquisition/sale, sale of common stock or ownership or merger at risk of defaulting on their PPP loan covenants, which would require immediate repayment of their PPP loan.

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Payroll Protection Program Flexibility Act

Coronavirus

On June 3, 2020, the U.S. Senate passed the Paycheck Protection Program Flexibility Act which was previously approved by the House of Representatives on May 28, 2020.  The Flexibility Act was written and considered in response to concerns raised by Payroll Protection Program (PPP) loan borrowers.  While this law has not yet been approved by the President, it is expected to be signed without change.  Once signed by the President, we anticipate the Small Business Administration (SBA) and Department of Treasury will issue guidance pertaining to the Flexibility Act, including a new form forgiveness application.  The following is a summary of the highlights of the Flexibility Act and resulting changes to the PPP provisions of the CARES Act.

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Payroll Protection Program Loan Audit Considerations and Guidance

Coronavirus

On May 22, 2020, the U.S. Small Business Administration (SBA), in consultation with the Department of Treasury, issued an interim final rule on review procedures and related borrower and lender responsibilities with respect to Payroll Protection Program (PPP) loans. This interim final rule provides information to borrowers who have received a PPP loan as to what to expect in the SBA’s review of an individual PPP loan and/or audit of a PPP loan. Additionally, the interim rule expressly states the SBA may review any size PPP loan issued under the PPP loan program at any time (and noting that borrowers must retain PPP documentation for six (6) years after the date the loan is forgiven or repaid in full) and provides information as to what the SBA may review.

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Payroll Protection Program Loan Regulations on Forgiveness

Coronavirus

On May 22, 2020, the U.S. Small Business Administration (SBA), in consultation with the Department of Treasury, issued an interim final rule (regulations) on the forgiveness process, requirements and considerations with respect to Payroll Protection Program (PPP) loans. This interim final rule provides information to borrowers on forgiveness and is in line with the guidance contained in the Loan Forgiveness Application published on May 15, 2020.

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SBA Forgiveness Application: Qualifying Costs and Forgiveness Considerations

Coronavirus

As set forth in the Paycheck Protection Program (PPP) provisions of the CARES Act, a borrower is eligible for forgiveness of a PPP loan in an amount equal to the sum of, generally, payroll costs, rent obligations, mortgage interest expense and utilities incurred and paid during an 8-week period commencing on the date a PPP loan is funded. In connection with eligibility for forgiveness, the Small Business Administration (SBA), in consultation with the U.S. Department of Treasury, recently issued the Paycheck Protection Program (PPP) Loan Forgiveness Application. The application is the first piece of guidance issued by the SBA with respect to forgiveness and aids borrowers in the tracking and calculation of loan forgiveness. Further, the form application and related instructions change certain anticipated aspects of forgiveness, while also increasing costs that may qualify for forgiveness. The following is a summary of the notable forgiveness application items relevant to many businesses.

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Affiliation Rules and Foreign Employees: Regulations Issued

Coronavirus

Under the Paycheck Protection Program (PPP) provisions of the CARES Act, generally a business is eligible for a PPP loan if the business, together with its affiliates, has 500 or fewer employees or operates in a certain industry and meets the applicable Small Business Administration (SBA) employee or revenue based size standard for that industry. Using the SBA permitted size standards, in some circumstances, a business (when considered together with its affiliates) could still be eligible for a PPP loan with greater than 500 employees.

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Paycheck Protection Program Loan Forgiveness and Tax Deductions

Coronavirus

On April 30, 2020, the IRS announced in Notice 2020-32 (the Notice), its position regarding the disallowance of certain otherwise allowable tax deductions for a borrower (taxpayer) that is forgiven repayment of a Paycheck Protection Program (PPP) loan. While the notice is apparently contrary to the intent of Congress and not entitled to judicial deference because it was issued without prior notice and comment, the IRS nevertheless will attempt to enforce it. 

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Waivers in the Time of Coronavirus

Coronavirus

As Georgia businesses consider reopening or expanding after Gov. Kemp’s most recent executive order, many are considering liability waivers to have clients and/or customers sign. To date, no courts have reviewed any waivers specifically in light of COVID-19, but there are some general principles available.

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Non-Legal Guidance – SBA FAQs Regarding Payroll Protection Program Loans

Coronavirus

On April 6, 2020, the U.S. Small Business Administration (SBA) issued FAQs in an effort to provide timely additional guidance to address borrower and lender questions concerning the implementation of the Paycheck Protection Program (PPP).

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