Last week, the U.S. Congress passed legislation authorizing an additional $310 billion for the Paycheck Protection Program (PPP), as well as an additional $10 billion for Economic Injury Disaster Loan (EIDL) program emergency grants and $50 billion of funding for EIDL loans. President Donald Trump signed the measure into law last Friday, April 24.
As a reminder, the PPP was initially created by the CARES Act on March 27 and applications first began to be accepted on April 3. Although it was announced on April 16 that the initial $349 billion authorized funding for the PPP had already been fully committed, the new legislation authorizes $310 billion more for the PPP (in addition to making more funding available for the separate EIDL program).
The new legislation and supplemental funding for the PPP provide another opportunity for those qualifying businesses that have suffered due to COVID-19 and that did not (or were not able to) previously submit an application for this program – or that applied and were not successful in the initial funding round of the PPP – to obtain funds for payroll and certain other expenses in the form of a loan that is potentially forgivable.
Similarly, the additional funding provided by the new legislation for the separate EIDL program (grants and loans) allows a further opportunity to obtain EIDL funds to cover economic injury losses incurred by businesses due to the COVID-19 pandemic.
Demand for the additional PPP and EIDL funds again is expected to exceed the amounts that will be available. Applications for both the PPP and EIDL programs have begun to again be accepted and processed starting this week. The funds are still being disbursed on a “first come, first served” basis, so prompt action is important.
Note that while not all nonprofit organizations are eligible for PPP funding, Section 501(c)(3) nonprofits are specifically permitted under the CARES Act to apply for PPP funds. For both for-profit and eligible nonprofit applicants, the PPP loan amount that may be available is generally determined based on such applicant’s pre-disaster “payroll costs,” and all (or a portion) of the total loan could be forgiven if PPP requirements are met.
Similar to the resumption of the PPP application process, applications for the EIDL program grants and loans once again have started to be accepted beginning this week (including for “private” nonprofits) pursuant to the additional funding provided under the new legislation.
NOTE: All applications for a PPP loan must include a certification of eligibility stating “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Recent SBA guidance on the PPP emphasizes that all applicants should carefully review this required certification before submitting their PPP application. Recently the SBA updated its Frequently Asked Questions about the PPP including Q&A #31, which states that “Borrowers must make this certification in good faith, taking into account their current business activities 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.”
 See prior BakerHostetler Alert dated April 24, 2020, that you can access here which provides additional information.