On April 24, 2020, President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act (the “PPP and HCE Act”), which amends the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide additional funding for the Paycheck Protection Program and economic injury disaster loan programs.

The PPP and HCE Act provides an additional $310 billion to The United States Small Business Administration (the “SBA”) to be used for Paycheck Protection Program loans (“PPP Loans”). Of that $310 billion, at least $30 billion are set aside for community lenders with less than $10 billion in assets and another $30 billion for community lenders with between $10 billion and $50 billion in assets. Other than this additional funding, no changes were made to the Paycheck Protection Program.

The CARES Act initially provided the SBA with $349 billion to be used for PPP Loans. Due to high demand, these allocated funds were fully accounted for within thirteen days. PPP Loans provide eligible small businesses with up to eight weeks’ worth of cash to be used for payroll costs, rent, utilities, and interest on mortgage loans. The recipient of a PPP Loan may request forgiveness of a certain portion of the loan proceeds. More detailed information regarding eligibility requirements and the application process for PPP Loans can be found on our website and in the SBA’s Frequently Asked Questions, which were most recently updated on April 23, 2020.

THE PPP and HCE Act also provides an additional $50 billion to the SBA for Economic Injury Disaster Loans (“EIDLs”) and an additional $10 billion for EIDL grants. Further, the PPP and HCE Act expands the eligibility requirements for EIDLs to include agricultural enterprises, which were previously considered ineligible for these funds. An agricultural enterprise is a small business engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural-related industries.

Under Section 7(b)(2) of The Small Business Act, the SBA is authorized to extend EIDLs to small businesses, private non-profit organizations, and small agricultural cooperatives in an area affected by a disaster which causes substantial economic injury. The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 declared the coronavirus outbreak to be a disaster permitting the SBA to extend EIDLs. In response, the governors of Nebraska, Iowa, and many other states have qualified with the SBA so that their residents may apply directly to the SBA for EIDLs. Application for these loans may currently be made on the SBA’s website, and the information required of businesses and sole proprietors is listed in the page preceding the actual application. These loans may be used to pay fixed costs (such as rent), payroll, accounts payable, and other bills that cannot be paid due to the effects of coronavirus, but cannot be used for certain purposes, such as refinancing debt, making payments on loans owed to another federal agency, paying tax penalty obligations, repairing physical damage, or to pay dividends to shareholders. Additional information about EIDLs can be found here.

Businesses are allowed to apply for both a PPP Loan and an EIDL as long as the funds obtained from each program are not used for the same purpose.

The Banking and Finance attorneys at Dvorak Law Group have the knowledge and experience to efficiently assist our clients with financing needs. Please contact Dvorak Law Group for specific questions and recommendations regarding how SBA loans may assist your business.