MPL General Counsel Corner – Things Must Be Moving To “Normal”

I am noticing that updates and questions about relief programs are slowing down.  It seems that businesses and organizations are getting laser focused on re-opening and what that means.  Moreover, if you look at the most recent PPP lending numbers through 5/23/2020, there is still funding left.  The average loan size in round two declined from to $61k per borrower as of 5/23 from $64k as of 5/16.  Also, the total amount of approved loans continued to shrink from $171B as of 5/16 to $169B on 5/23.  See my attached spreadsheet for the updated loan numbers.

The optimist in me says that things are settling down and must be moving to “Normal”.  Let’s hope the second half of 2020 is better than the first half.  Regardless, you choose whether you want to participate in a recession.

Here are some other things that may be important or relevant for you:

Please see all of our prior updates at the this link or if you would like to be added to our email list, please click here

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com) or anyone in our office with questions or comments.  

MPL General Counsel Corner – PPP guidance is like the weather, if you don’t like it, wait five minutes.

During this time of year, if you don’t like weather, wait five minutes.  Well, I feel the same way about PPP and other relief programs.  Late Friday, the Department of Treasury released the following two Interim Final Rules (key points/updates listed below each link):

  1. IFR – Loan Forgiveness
    1. The Lender has 60 days from receipt of the loan forgiveness application to issue a decision to the SBA (change from what I heard prior to 5/22) and request payment from SBA.  (page 7)
    2. The SBA, subject to any audit, has up to 90 days to issue payment and any applicable interest less EIDL Advance Amounts (change from what I heard prior to 5/22; page 7)
    3. Upon receipt of a decision/payment from SBA, Lender then notifies Borrower of the decision and whether the balance of the loan must be paid on or before the two year maturity date (big change because it opens the door for the Lender to call the loan earlier than the maturity date; page 8)
    4. The SBA & the Department of Treasury clarified and provided more flexibility for employers that have different payroll periods (e.g., weekly, monthly, bi-weekly).   Essentially, the borrower’s eight-week period begins on the first day of the first payroll cycle in the covered period (see example on page 10).
    5. Hazard pay and bonuses are allowed to be paid to employees as long as the annual salary of does not exceed $100,000 (as prorated for the covered period; $15,385 for 8 weeks; page 11)
    6. Non-payroll costs incurred but paid on the next billing cycle which is outside the covered 8-week period are eligible for forgiveness (see example on page 12).
    7. Advance payments of eligible mortgage interest are not eligible for forgiveness.
    8. Clarifications on the definition of Full Time Equivalent, the impact of Salary Reduction, attempts to rehire laid off employees who do not want to return, and employees who are fired for cause, voluntarily resign or request a schedule reduction (pages 13-22)
  2. IFR – SBA Loan Review Procedures and Related Borrower and Lender Responsibilities
    1. The SBA may review any PPP loan of any size at their discretion.  (page 7)
    2. The borrower must retain documentation for the PPP loan for 6 years after the loan is forgiven or paid back in full.  (page 8)
    3. If the SBA determines a borrower was ineligible to receive a PPP loan or receive PPP forgiveness, there will be an appeals process.  The appeals process will be outlined in a subsequent IFR.  (page 10)
    4. If the Lender determines that the Borrower is not entitled to forgiveness in any amount, they must notify in writing the SBA and the Borrower with its reason.  The Borrower has 30 days from the denial to request a review of the forgiveness application.  (page 13)
    5. If the SBA determines a Borrower is ineligible for a PPP loan and the lender had already approved it, the Lender’s processing fees are subject to a claw-back.  The timeframe for the SBA to make this determination is 1 year from the date of the PPP loan disbursement.  (page 15)
    6. If an SBA lender does not satisfy its obligations under the PPP regulations, then its lender processing fees are subject to a claw-back and the accompanying loans may lose its SBA guarantee.  (page 16)

Here are some other things that may be important or relevant for you:

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com) or anyone in our office with questions or comments.  

MPL General Counsel Corner – PPP Loan Forgiveness – A Tale of Two Cities

Hi Everyone:

The million-dollar question (bad analogy, but the best I can come up with): What does the loan forgiveness process look like?  I have chatted with several lenders and the most common response has been:  “we are working on it”.

Here is what I know:

  1. The Lenders have 60 days from the submission of the forgiveness application to provide an answer to the borrower.
  2. The Lenders will be making an initial determination, which will then be submitted to the SBA for ultimate approval and funding (also falls in the 60 day timeline).
  3. Paperwork submission and review will not be uniform in terms of the way you send it to the Lender.
    • One lender email that I recently reviewed mentioned a link to a portal will be used for document submission.
    • Another lender is not certain if they will use internal staff or outsource the document review to a third-party consultant.  They have also not decided how the document submission will work.
  4. I have included a few useful links for PPP forgiveness guidance from the US Chamber of Commerce, Trout CPA and RKL.
    1. US Chamber of Commerce:  PPP Guide to Loan Forgiveness
    2. Trout:  Loan Forgiveness Worksheet
    3. RKL:  PPP Forgiveness & Cashflow Link

The long and short is that this process will likely not be uniform at the start, but hopefully will improve over time.  It will also be a “Tale of Two Cities” as the larger (>$2M) PPP loans will be scrutinized and questioned more versus the smaller (<$2M) PPP loans.

I hope you get out and enjoy your Memorial Day this weekend.

Here are some other things that may be important or relevant for you:

Please see all of our prior updates at the this link or if you would like to be added to our email list, please click here

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com) or anyone in our office with questions or comments.