The SBA’s updated guidance and sample application provides additional information regarding certain aspects of the PPP loan program, including the following:
Processing of formal applications by SBA 7(a) lenders and other participating institutions will begin on Friday, April 3, 2020 for small businesses and sole proprietorships, and one week later on April 10, 2020 for independent contractors and those who are self-employed. We expect that the PPP will be very popular and that lenders may have limited capacity to issue covered loans. Small business owners are encouraged to reach out to lenders with whom they have an existing relationship or other potential lenders so that they are prepared to proceed quickly once applications can be processed.
Although PPP loans may be used for non-payroll expenses like rent, utilities and interest on mortgage payments, the application form and related guidance indicate that not more than 25% of the forgiven amount will be for non-payroll costs.
The sample application requires a list of the owners of the applying business with greater than 20% ownership interests. In addition to the business itself, each 20% owner will be required to make good faith certifications in connection with the loan application that include, but are not limited to, certifying that need for the loan is based on the current economic uncertainty, the funds will be used for the permitted purposes, payroll documentation is accurate, and that no other PPP loans have been or will be received.
The application explains that certain applicants will be denied for reasons such as (i) bankruptcy by the business or any owner, (ii) delinquency by the business or any owner on a loan from the SBA or other federal agency in the past seven years that caused a loss to the government, (iii) certain formal criminal charges against or indictment of individual applicants or owners of 20% or more of the business, and (iv) any felony or misdemeanor crime against a minor by an individual applicant or owner of 20% or more of the business within the last seven years. In addition, applicants must either be a U.S. Citizen or have Lawful Permanent Resident status.
Although the form application and guidance do not mandate specific supporting documentation for the application, and underwriting practices may vary by individual lenders, we expect that applicants for PPP loans should anticipate requests by lenders for additional supporting documentation, which may include:
The Coronavirus Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the COVID-19 situation develops.
 Based on the sample application, the parties listed below will be included as being “owners” or “principals” for purposes of the application: