Sens. Want Assurance That Small Firms Can Reapply For PPP

By Al Barbarino
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our daily newsletters. Signing up for any of our section newsletters will opt you in to the daily Coronavirus briefing.

Sign up for our Banking newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!



Law360 (July 20, 2020, 10:09 PM EDT) -- Following an easing of the loan forgiveness terms surrounding the Paycheck Protection Program, small businesses and nonprofits must be given assurances that they're allowed to reapply for the much-needed relief, a bipartisan pair of senators urged the U.S. Treasury Department and the Small Business Administration on Monday.

Borrowers who rejected or returned loans out of fear that they would be forced to repay them, or were forced to accept smaller loans, still face confusion following June 5 amendments that don't specify whether they are allowed to access the program's more than $100 billion in remaining funds, wrote Chris Van Hollen, D-Md., and M. Michael Rounds, R-S.D., in a letter addressed to Treasury Secretary Steven Mnuchin and Jovita Carranza, the administrator of the SBA.

"Modifications to the program … provide an opportunity for these small business owners to reapply for loans with more favorable forgiveness terms than under the original program," they wrote. "However, if businesses and lenders are not provided clarity from your agencies regarding their ability to reapply or request a loan increase, the modified program will not reach many small businesses and non-profit organizations that are still in urgent need of assistance."

The June 5 amendments, under the Paycheck Protection Program Flexibility Act of 2020, raised the non-payroll portion of forgivable funds from 25% up to 40%, meaning that more funds could be used for purposes other than paying employees.

Among the additional provisions seen as less restrictive for both small businesses and nonprofits, the June bill also gave businesses more time to make employment, salary or wage changes without impacting the forgivable amount of their PPP loan.

In addition, it allowed them to defer payments until compensation for forgiven amounts was received and eliminated a provision that would have made recipients of forgiven loans ineligible to defer payroll taxes.

But nowhere in the three-page document is there a mention of whether reapplication is allowed in light of the new terms.

"This is especially troubling considering the large number of small businesses still facing hardship due to the pandemic," the senators wrote. "Congress authorized the PPP for good reason, and we expect those administering the program to encourage its use."

The U.S. House of Representatives passed a bill extending the PPP through Aug. 8 early this month, with its sponsor Sen. Ben Cardin, D-Md., at the time noting that it would give lawmakers more time to assess whether an additional round was needed.

At the time $130 billion of the roughly $660 million total pot remained.

The Treasury Department and the SBA did not immediately respond to requests seeking comment.  

--Additional reporting by Andrew Kragie. Editing by Emily Kokoll.

For a reprint of this article, please contact reprints@law360.com.

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Beta
Ask a question!