On Friday March 27, 2020, the President signed into law, the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) or “CARES Act,” providing for, among other things, the Paycheck Protection Program (“PPP”).
From time to time , the U.S. Small Business Administration (SBA) has issued interim final rules relating to the implementation of sections 1102 and 1106 of the CARES Act, relating, respectively, to the new PPP and forgiveness for qualifying loans under the PPP.
Guidance on Disbursements
On Tuesday April 28, 2020, the SBA issued an interim final rule which is effective immediately and supplements the previous interim final rules with additional guidance regarding disbursements of PPP loans (the “SBA Interim Rule on Disbursements”).
Among other things, the SBA Interim Rule on Disbursements provides that:
A borrower cannot take multiple draws from a PPP loan and thereby delay the start of the eight-week covered period. The lender must make a one-time, full disbursement of the PPP loan within ten calendar days of loan approval. For the purposes of this rule, a loan is considered approved when the loan is assigned a loan number by SBA. For loans that received an SBA loan number prior to the posting of this interim final rule but have not yet been fully disbursed, the following transition rules apply:
- The ten calendar-day period described above begins on April 28, 2020.
- The eight-week covered period began on the date of first disbursement.
Additions to FAQs
As we have previously reported, the SBA, in consultation with the U.S. Department of the Treasury, has from time to time issued responses to frequently asked questions by lenders and borrowers regarding the PPP (the “SBA PPP FAQs”). A current copy of the SBA PPP FAQs is available here.
On April 28, 2020, the SBA further updated the SBA PPP FAQs by adding Q/A 37, regarding whether businesses owned by private companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan.
The answer provided by the SBA to this new FAQ #37 was to refer back to the previous response to FAQ #31 (which addressed the availability of the PPP to large companies with adequate sources of liquidity). Essentially, the SBA is taking the position that all businesses, large or small, should take into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business, in making the good faith certification that the loan request is necessary.