Updated FAQs about PPP loans

Updated FAQs about PPP loans

The U.S. Treasury Department posted an updated version of a set of “frequently asked questions” (FAQs) concerning the Paycheck Protection Program (PPP) as administered by the Small Business Administration (SBA).

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The PPP is a program providing financial support lending for small and large businesses pursuant to measures originally included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. No. 116-136). Additional measures concerning the program were enacted under the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260) (the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act is one of the titles of the legislation enacted December 27, 2020). That legislation effectively opened up the availability for a “second draw” for PPP loans.

Subsequently, President Biden on March 11, 2021, signed into law the “American Rescue Plan Act of 2021” (Pub. L. No. 117-2).

The PPP was scheduled to expire March 31, 2021. President Biden on March 30, 2021, signed legislation (Pub. L. No. 117-6) that extends the PPP through June 30, 2021 (that is, the program is extended through June 30, 2021, but the PPP extension legislation provides that for the final 30 days of the PPP (from June 1 through June 30, 2021), the SBA can only process applications submitted before June 1, 2021, and cannot accept any new loan applications).

The FAQs [PDF 382 KB] were most recently updated April 6, 2021, with the addition of FAQ 67 (text of which is provided below). A header added to these FAQs states:

These FAQs are in the process of being revised and do not yet reflect changes made by the American Rescue Plan Act of 2021 enacted on March 11, 2021.

New FAQ 67

67. Question: To be eligible for a PPP loan, each applicant must certify on the PPP borrower application that the applicant and any owner of 20% or more of the applicant are not “presently involved in any bankruptcy.” If an applicant or owner filed for bankruptcy protection in the past, when is an applicant or owner no longer considered to be “presently involved in any bankruptcy” for PPP loan eligibility purposes?

Answer: If an applicant or owner has filed a Chapter 7 bankruptcy petition, the applicant or owner is considered to be “presently involved in any bankruptcy” for PPP eligibility purposes until the Bankruptcy Court has entered a discharge order in the case. If an applicant or owner has filed a Chapter 11, 12 or 13 bankruptcy petition, the applicant or owner is considered to be “presently involved in any bankruptcy” for PPP eligibility purposes until the Bankruptcy Court has entered an order confirming the plan in the case. Additionally, if the Bankruptcy Court has entered an order dismissing the case, regardless of the Chapter, the applicant or owner is no longer “presently involved in any bankruptcy.” The discharge order, the order confirming the plan or the order of dismissal, whichever is applicable, must be entered before the date of the PPP loan application. Notwithstanding the foregoing, if an applicant has permanently closed as a result of a bankruptcy filing, the applicant is ineligible for a PPP loan because the applicant is required to certify on the PPP borrower application that the applicant “has not permanently closed.”

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