SBA Lending Under the CARES Act: New Paycheck Protection Program, Expanded Disaster Loans, Loan Forgiveness

Recording of a 90-minute premium CLE webinar with Q&A

Conducted on Tuesday, May 12, 2020

Recorded event now available

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Program Materials

This CLE webinar will examine the Paycheck Protection Program (PPP) and other features of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which expand upon the existing Small Business Administration (SBA) loan programs in response to the COVID-19 pandemic. The panel will discuss experience with the application and funding processes, legal and administrative requirements for SBA lenders under each program, PPP loan forgiveness, and the short and long term consequences of the PPP to lenders and borrowers.

Description

On Mar. 27, 2020, the President signed the CARES Act into law and the Paycheck Protection Program and Health Care Enhancement Act (the PPP Enhancement Act) is pending. The CARES Act includes several provisions of significance for SBA lenders and borrowers affected by COVID-19.

The PPP provides short-term federally guaranteed loans for eligible small businesses with no more than 500 employees (or more, depending on the NAICS code of a business), sole proprietors, independent contractors, and self-employed individuals who apply by June 30, 2020. Initial borrower applications far exceeded the initial $349 billion of funding. The pending PPP Enhancement Act expands eligible PPP borrowers, and authorizes an additional $310 billion of PPP loans with $30 billion allocated for PPP loans by community banks, and another $30 billion for regional banks.

There are complex considerations when making or taking PPP Loans. Borrowers will be eligible for loan forgiveness of up to eight weeks of payroll costs, interest on mortgage payments, rent payments, or utility payments, but it is important that borrowers thoroughly understand the limitations placed and specific record-keeping and reporting requirements apply. Banks need to navigate ever changing guidance related to the PPP, borrowings under the new Federal Reserve PPP Liquidity Facility and how to process PPP loan forgiveness. Importantly, amounts forgiven will not be taxable income to the borrower.

The CARES Act also expanded the Economic Injury Disaster Loan (EIDL) program to include sole proprietors, independent contractors, nonprofits, tribal businesses, and ESOPs with fewer than 500 employees. The PPP Enhancement Act provides $50 billion more for Economic Injury Disaster Loans (EIDLs) under section 7(b) of the Small Business Act and an additional $10 billion for Emergency EIDL Grants authorized under the CARES Act. The Act also provides for payment deferrals and payment subsidies for certain 7(a) loans (excluding PPP), loans made by intermediaries under Title V of the Small Business Investment Act, and loans made under Section 7(m) of the SBA Act.

Listen as our authoritative panel discusses these and other initiatives authorized under the CARES Act, including new eligibility requirements for borrowers and the closing and servicing issues presented for SBA lenders under these programs.

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Outline

  1. Existing SBA programs and framework
    1. Eligible borrowers
    2. Approved lenders
    3. SBA loan guarantee
    4. Closing and administration generally
    5. New initiatives under the CARES Act
  2. Paycheck Protection Program (PPP)
    1. Application, closing, and administration of the PPP
    2. Expanded eligibility for economic injury disaster loans and emergency grants
    3. Loan payment deferrals and subsidies
    4. Considerations for lenders and their other relationships with PPP borrowers
    5. Application of the SBA and PPP affiliate rules
    6. Obtaining PPP loan forgiveness, including advance forgiveness and timing
    7. Secondary market for PPP loans and the Federal Reserve’s PPP Lending Facility
    8. Regulatory considerations for PPP lenders
    9. Short and long term effects of PPP on borrowers and lenders, and interaction with other CARES Act and government programs addressing the economic effects of COVID-19

Benefits

The panel will review these and other key issues:

  • Can lenders that are not currently SBA-approved qualify to participate in these lending programs? What is the process and issues to be considered?
  • How does the CARES Act expand upon existing SBA disaster loan programs?
  • Borrower and lender responsibilities and applications under PPP and other SBA programs, including borrower applications for loan payment subsidies for 7(a), Title V, and 7(m) loans and PPP loan forgiveness
  • What are the legal, regulatory, customer relationship and other pitfalls for borrowers and lenders under the PPP loan program and other new lending initiatives?

Faculty

MacDonald, Ralph
Ralph F. (Chip) MacDonald, III
Of Counsel
Jones Day

Mr. MacDonald's practice emphasizes securities, mergers and acquisitions, corporate governance, financial...  |  Read More

Morrone, Vincent
Vincent M. (Vince) Morrone
Attorney
Michael Best & Friedrich

Mr. Morrone represents clients involved in sophisticated transactions, including commercial lending; business planning...  |  Read More

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