Update: PPP Loan Program Extended to August 8, 2020
On July 3, 2020, the President signed legislation extending the application deadline for small businesses to apply for the Paycheck Protection Program (“PPP”). The original deadline to apply for a PPP loan was June 30, 2020. Both houses of Congress unanimously passed the “PPP Extension Act” last week, and with the signing of this Act, small businesses will now have until August 8, 2020 to apply for assistance under the PPP loan program. From various accounts, as of the signing of this Act, approximately $130 billion in loan funds remains available for distribution under the Paycheck Protection Program.
Observation: Although the PPP Extension Act extends the application period for certain eligible businesses, sole proprietors, and independent contractors, the PPP Extension Act does not change or provide any update to the SBA or United States Treasury’s current PPP guidance or Interim Final Rules. Instead, the Act serves only to allow eligible PPP loan applicants who never previously received a PPP loan (or possibly those who did not initially apply for the limited amount permitted under the Paycheck Protection Program) the ability to submit a PPP application up until August 8, 2020. The Act does not in any way change the formula used to compute the maximum PPP loan that can be obtained by a loan applicant. Therefore, (i) those who already applied for and received the maximum PPP loan (i.e., 2.5 times the monthly base period payroll amount) can’t apply for any more in the way of PPP loans by virtue of the PPP Extension Act, and (ii) the information listed in our prior updates remains unchanged except for the new PPP application deadline of August 8, 2020.
What to look out for: Sometime in the upcoming weeks, we anticipate seeing a number of proposals related to the PPP loan program as part of a new recovery package. Last week, there was a bill introduced, which, if enacted, would provide simplified forgiveness for PPP loans under $150,000. Furthermore, several U.S. Senators introduced a “Prioritized Paycheck Protection Program (P4) Act” last month, which would allow an eligible PPP loan applicant (who previously secured a PPP loan) to receive an additional PPP loan if the applicant was able to meet certain narrowed eligibility requirements. Proposals like these are just a small part of the continuing conversations of what may be included in a fourth stimulus package.
Please note that these considerations are in proposal form only, and no one can assure whether there will be an additional stimulus package, or if there is, what such a new and final stimulus package will include or leave out. We are continuing to evaluate recent developments, and will make every effort to provide additional information if we discover any material developments in our continuing review of US Treasury and SBA updates.
Note to SBA Lenders: The PPP Extension Act also separates the dollar amounts authorized for loans under Section 7(a) of the Small Business Act from those funds allocated to businesses under the PPP loan program. Thus, moving forward, the SBA 7(a) loan program’s authorization cap will not be included in the PPP loan program’s authorization cap. This is a welcomed response to SBA 7(a) lenders’ concerns, since the CARES Act did not address whether there would be any impact of the SBA’s PPP loan funds on the regular SBA 7(a) loan approved program cap. As to whether there will be continued guidance or enhancements to the SBA 7(a) loan program made in the coming weeks, we will have to wait and see whether the SBA provides such further guidance.