President Trump has signed a $480 billion spending package to aid small businesses during the Covid-19 pandemic. The bill provides additional funds for the Paycheck Protection Program (“PPP”) created by the CARES Act, which was passed in March. The PPP, which provides loans to small businesses with less than 500 employees, quickly ran out of funds. Under this additional stimulus package, $320 billion is allocated to the PPP, with $60 billion of that money carved out for community and mid-sized lenders. The full text of the bill can be found here.

In addition to the bill signed by the President earlier today, Small Business Administration (“SBA”) posted an interim final rule (the “April 24 Rule”) supplementing its interim final rules posted on April 2, 2020, April 3, 2020 and April 14, 2020. Among other provisions, the April 24 Rule confirms that lenders may use either their own promissory note or an SBA form of promissory note in making loans under the PPP in order for SBA to guarantee the PPP loan.

In addition to the form of loan documents, the April 24 Rule clarifies that hedge funds, private equity firms and businesses in bankruptcy are ineligible for a PPP loan. On the other hand, businesses engaged in legal gaming are eligible for a PPP loan if the legal gaming business meets the other requirements for eligibility for a PPP loan. State and locally owned hospitals that receive less than 50% of their funding from state or local government sources (exclusive of Medicaid) are clearly eligible for a PPP loan.

The April 24 Rule created a safe-harbor for certain borrowers that received a PPP loan prior to April 24, 2020. Pursuant to this safe harbor, borrowers that received a loan through borrower’s misunderstanding or misapplication of the certification that current economic conditions made the loan necessary to support the borrower’s ongoing operation, may repay the loan by May 7, 2020. By timely repaying the PPP loan, those borrowers will be deemed by SBA to have made the certification in good faith.

Bowles Rice continues to closely monitor federal, state and local developments related to the novel coronavirus pandemic. Be sure to visit the COVID-19 Response Team page on our website for a comprehensive listing of available services.

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If you have questions about the PPP or would like more information, please contact one of the following Bowles Rice attorneys: