Thread by @danieltkane

#HeroesAct2 — LiveTweeting Legislation

Like many #smallbiz attorneys and advocates, I’m spending most of tonight and tomorrow reading over the Democrats newly-released #COVID19 #stimulus package. As I review, I’ll share some insights and discoveries. Stay tuned!

Congress proposes three #setasides for #PPP funding:

(1) at least 10% for #smallbiz with fewer than 10 employees OR for certain loans made to biz in low- and mod-income areas

(2) < 30% for nonprofits, housing coops, and hotels/restaurants

(3) < 50% for supplemental PPP loans.

Also similarly reserves the lesser of 25% or $15B of the unused #PPP loans appropriations for loans by Community Financial Institutions.

Disclaimer: I will likely get more into the weeds of #HeroesAct2 than some general reporting. So, if you have questions, always seek advice from an attorney before acting upon this information. #lawyering

For the #PPP #setaside for “smaller” businesses of 10 or fewer employees, Congress is allocating all funds recovered from cancelled PPP loans. Put differently, any PPP loan recovered thru an SBA #audit will be used for the smallest companies.

It appears all #PPP Borrowers will be able to select a covered period between 8 weeks and 24 weeks from the loan. And Congress clarifies that borrowers can apply anytime after spending the proceeds and complying with other forgiveness requirements (e.g., 60-40 rule).

#PPPDoubleDip: #smallbiz (1) with fewer than 200 employees, (2) that are not publicly traded, and (3) had a 25% reduction in gross receipts in Q1, Q2, or Q3 of FY2020 when compared to the same period in FY2019 (“significant loss in revenue”) may receive one supplemental #PPP loan

Congress provides that #smallbiz that were not existing in April 2019 or that are seasonal can use an alternative period for showing “significant loss in revenue”.

You can only do a #PPPDoubleDip if you have already exhausted or can project exhaustion of the first #PPP loan will occur before a supplemental PPP loan can be disbursed.

#NAICS Sector 72 businesses like hotels, restaurants, inns, casinos, etc. with fewer than 200 employees per location can get a supplemental #PPP loan — but no more than $2M in total across all locations.

For supplemental loans under #PPPDoubleDip, lenders would rely on the average monthly payroll used to calculate original #PPP loan. Supplemental loans are 2.5x the avg. monthly payroll or $2M, whichever is less.

Interestingly, #HeroesAct Pt 2 states that borrowers applying for a supplemental #PPP would not need to certify it doesn’t have an application pending or for the same purpose — the basis for “one loan per borrower” rule. But, it is silent about the “economic need” certification.

For #PPP loans under $50K, a borrower would not need to file a forgiveness application and would merely certify the funds were used appropriately. These borrowers, tho, have to retain certain proof for at least 3 years.

For #PPP loans b/w $50K and $150K, a borrower could supply a simplified one-page #forgiveness application. The borrower would still need to certify compliance and retention of certain documents for at least 3 years.

For #PPP loans greater than $150K, it appears the #forgiveness application and criteria remains unchanged.

HeroesAct2 appears to expands# basic eligibility for #PPP loans to other 501(c) statuses like 501(c)(6) organizations, government-funded entities, and “destination marketing organizations” like @centralBID and @CentralSQBID

Congress appears to open the door to not-so-small #nonprofits, government-funded entities, and other covered organizations (e.g., housing coops) with MORE than 500 employees if that entity has suffered a 25% reduction in gross receipts in any quarter of FY20 compared to FY19.

Certain #news media is eligible for #PPP loans, but eligibility is far more expansive. Each physical location, except the parent news company, is treated as a separate, unaffiliated entity eligible for funding — if it can demonstrate the need for the loan to continue reporting.

#HeroesAct Part 2 would add new permissive uses of #PPP loans:

(1) costs of procuring #PPE for employees;

(2) payments on inventory, raw materials, and supplies; and

(3) costs related to damage, vandalism, or looting due to “public disturbances” during 2020 (e.g., protests)

While costs of #PPE, supplies/inventory, and repairs due to “public disturbances” could be covered using #PPP proceeds, these would likely be non-payroll costs limited to 40% of the total loan amount.

Biz that are publicly traded on national exchanges and #smallbiz majority owned or controlled by a foreign person (not domiciled in the US) would no longer be eligible for #PPP. Ownership and control for these entities will likely be governed by 13 CFR Part 121 as for size.

Important: Congress would require an analysis of the borrower’s ability to obtain credit elsewhere for new #PPP loans greater than $350K. Abandonment of “credit elsewhere” in #CARESAct was a major cause of large and well-funded companies getting loans and focus on “economic need”

For #smallbiz that prudently returned #PPP funding during the grace period related to “economic need” certifications, Congress would declare those borrowers could reapply for loans. These biz may even be able to get a supplemental loan if they quickly exhaust the first one.

@SBA would 15 days from enactment of #HeroesAct2 to issue regulations implementing these new parts of #PPP. Assuming they take all 15 days, #PPPDoubleDip and additional #PPP loans should be available by late October 2020.