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CARES ACT-PAYCHECK PROTECTION PROGRAM UPDATE: Additional $310 Billion for the Paycheck Protection Program Enacted into Law and SBA Issues Additional Program Guidance

Author: Bruce S. Goodman, Esq.

Appropriations for the Paycheck Protection Program (PPP) were exhausted last week because of overwhelming demand. This week Congress passed legislation appropriating an additional $310 billion to the program. The President signed the bill Friday afternoon. If you previously filed a PPP loan application that has yet to be approved or funded, contact your bank representative to confirm your application remains pending. If you are an eligible borrower but have yet to file a PPP loan application, you should do so now. There is no guarantee that Congress will appropriate additional funds when this supplemental appropriation is exhausted.

Additionally, the Small Business Administration (SBA) issued supplemental guidance concerning the PPP yesterday. The two most salient updates are:

For Borrowers

SBA instructed eligible borrowers to carefully review the loan application certification pursuant to which the applicant must certify that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." SBA cautioned that applicants should make this certification in "good faith," taking into account "their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations." In other words, SBA is suggesting that applicants who can obtain funds from other sources, or do not otherwise require PPP funds to maintain ongoing business operations in a manner "not significantly detrimental to the business," cannot make the required certification in good faith and should not apply for a PPP loan. Consistent with this updated guidance, some companies have returned PPP loans or withdrawn their applications.

For Lenders

SBA clarified that the information lenders are required to collect from a PPP loan applicant regarding every owner with a 20% or greater ownership interest in an applicant business satisfies a lender's obligation to collect beneficial ownership information under the Bank Secrecy Act (BSA), which has a 25% ownership threshold. For a lender's existing customers, if the lender previously verified the applicant's information, the lender is not required to re-verify the information to satisfy the BSA. If the applicant is a new customer, the lender's collection of the required information will be deemed to satisfy applicable BSA requirements and FinCEN regulations governing the collection of beneficial ownership information. SBA further clarified that federally insured deposit institutions and credit unions do not need to collect such information for existing customers applying for new PPP loans unless otherwise indicated by the lender's risk-based approach to BSA compliance.

SBA's updated guidance can be found here:
https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf