New Stimulus Package Adds $310 Billion Infusion to PPP; SBA Encourages Return of Loan Money
Today, President Trump signed into law a new stimulus package containing $484 billion in additional relief, including a $310 billion injection into the Paycheck Protection Program (“PPP”), which had run out of funds earlier this month. In addition to the much-anticipated PPP cash infusion, the package sets aside, among other things, an additional $60 billion for economic injury disaster loans (“EIDLs”), $25 billion for COVID-19 testing, and $75 billion for health care providers’ health care expenses or lost revenues attributable to COVID-19.
The changes to the PPP from the original version contained in the CARES Act that passed on March 27th, 2020, are fairly straightforward. First, it increases the amount of the PPP program by $310 billion to $659 billion. Second, it provides that $60 billion of loans guaranteed under the program, going forward, must be administered through small depository institutions and credit unions (less than $50 billion in assets), and “community financial institutions” (including minority-owned banks, certified development companies, and microloan intermediaries). Sen. Marco Rubio, an author of the PPP, tweeted that he expected the program to “relaunch” on Monday, April 27, but, as of this date, no additional guidance from the SBA has issued.
Separately, the SBA issued new guidance on April 24 creating a “safe harbor” whereby borrowers who returned their loans in full by May 7 would be deemed to have made the certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant,” in good faith. This new rule appears designed to encourage public companies with adequate sources of liquidity, some of which have faced public backlash for receiving a loan notwithstanding their apparent eligibility for a PPP loan, to return their loan money to the till. The safe harbor rule does not make any changes to the existing certification requirement, which all borrowers must comply with when applying for a PPP loan.
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