Additional Paycheck Protection Program Funding Approved; Disaster Loan Program Expanded To Farmers
On April 24, H.R. 266, the Paycheck Protection Program and Health Care Enhancement Act, was signed into law. In addition to providing significant funding for health care providers ($75 billion) and testing ($25 billion), the stimulus package revives the CARES Act’s Paycheck Protection Program (PPP) with an additional $310 billion in funding for forgivable loans. This expanded stimulus and relief package sets aside a portion of that funding for smaller lenders. The additional funding does not change the limits on the availability of the PPP’s forgivable loans, nor change the priority of borrowers in obtaining those loans.
However, in reaction to various reports on public companies obtaining PPP loans, the Treasury Department updated its PPP FAQs and this morning, April 24, issued additional proposed rules regarding the required certification that the “current economic uncertainty makes this loan request necessary,” and provided a safe harbor for entities that may have certified this under a misapprehension of the standard to return funds that were obtained previously. Borrowers must “certify in good faith that their PPP loan request is necessary.”
The legislation also makes one significant change to the CARES Act, by now allowing agricultural enterprises (i.e., farmers) to seek Economic Injury Disaster Loans. The SBA’s EIDL Program is typically not available to agricultural enterprises, which would normally turn to the USDA’s FSA Emergency Farm Loan program in a natural disaster. However, that program covers actual damages to crops. With the change to the provision made in H.R. 266, agricultural enterprises can now seek EIDLs from the SBA for economic losses, including a $10,000 advance that does not need to be repaid. However, even with the additional funding whether new applicants will be able to obtain EIDLs is unclear. Applications are processed on a “first come, first served” basis, and reports indicate a very large volume of applications that have not been funded already. The SBA had paused accepting applications for EIDLs pending additional funding. Details on the EIDL program are available on the SBA’s website here.