Cherylyn Harley LeBon is a partner and Ithi Joshi is an associate for Dunlap Bennett & Ludwig, practicing out of the Tysons Corner office.

NOTE: Please see Part I of DBL coverage of the PPP here

[Apr. 24, 2020 Tysons Corner] The Paycheck Protection Program (“PPP”) was implemented on March 27, 2020, for businesses to receive loans as early as April 3, 2020. The relief package is designed to support businesses, private nonprofits, and self-employed individuals impacted by COVID19. It took less than 2 weeks to exhaust the PPP allocation of $349 billion.

The White House and Senate finalized a second relief package of $484 billion earlier this week to replenish the first round of PPP funding. Unanimously approved pro forma by the Senate, it passed in the House on Thursday, and was signed by President Trump today. The new bill, called The Paycheck Protection Program and Health Care Enhancement Act (“CARES 2.0”) builds on the preexisting CARES Act and will inject more money into the economy to ensure that businesses can meet operating expenses and keep employees on the payroll.

Democrats and Republicans were stuck in intense negotiations over what to include in the new relief package. Democrats pushed for a national testing strategy, while Republican lawmakers emphasized the need for Governors and states to take ownership with testing. Democrats insisted on hospital and testing funds, which was agreed to, and $150 billion for state and local governments, which was refused.

CARES 2.0 is set to become law in response to the PPP being criticized for supporting large corporations, as franchise restaurants and hotel chains were able to obtain funding more easily than smaller businesses. Newly revised guidance (see link for PPP Loans Frequently Asked Questions as of April 23, 2020) makes it harder for large corporations to access the new round of funding.

Under the new relief bill, a business must be able to show that the loan is 1) necessary for survival and that 2) it cannot tap into other sources of funding. Note that most publicly traded corporations have access to markets for additional capital. The Small Business Administration (SBA) has indicated that companies who applied for and received a PPP loan before the rule change can avoid scrutiny by returning the relief loans. Recently, the publicly traded burger chain, Shake Shack, returned a $10 million PPP loan after it made $150 million in stock issuance revenue.

Here are the main components of CARES 2.0:

  • $310 billion to replenish the PPP
    • After the SBA was criticized for favoring larger lenders and financially robust business borrowers, $60 billion of the $310 billion must be allocated to federally insured banks and credit unions.
    • Moreover, $30 billion of this $60 billion must go to smaller lenders with less than $10 billion in assets to direct funding to those who have trouble accessing traditional forms of credit.
    • The same forgiveness rules and first-come, first-serve basis will apply to this second wave of PPP.
  • $60 billion for the SBA’s Economic Injury Disaster Loan program
    • $50 billion must be used towards loans and $10 billion must be used in grants.
  • $75 billion for hospitals to cover treatments related to the coronavirus and any lost revenue from cancelled, non-coronavirus related elective procedures
    • This amount is in addition to the $100 billion already allocated to hospitals under the original CARES Act.
  • $25 billion for the development and expansion of coronavirus testing
    • $11 billion will be distributed to states for governors to directly manage and administer testing

Contact your DBL attorney today to see how your small business can benefit from CARES 2.0. As always, DBL is available to support you during these challenging times.


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Posted in: Business Law

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