On March 6th, the Coronavirus Preparedness and Response Supplemental Appropriations Act (“Phase I Bill”) was signed into law and addressed the Small Business Administration (the “SBA”) Economic Injury Disaster Loan Program (the “EIDLP”). On March 25th, by a vote of 96-0, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), a sweeping $2.2 trillion stimulus package, which includes a $350 billion SBA loan guarantee program established under the “Paycheck Protection Program” to help small business pay for payroll and other necessary overhead expenses such as rent and mortgage interest and which will be available during the period beginning February 15, 2020 through June 30, 2020 (the “Covered Period”). The House approved the CARES Act on Friday, March 27th, and the legislation was signed into law on the same day. On March 31, 2020, the SBA released the Paycheck Protection Program Information Sheet (the “Information Sheet”) to offer additional guidance to potential borrowers under the Paycheck Protection Program. On April 2, 2020, the SBA released an Interim Final Rule on the “Business Loan Program Temporary Changes; Paycheck Protection Program” (the “Initial Interim Final Rule”). On April 3, 2020, the SBA released an additional Interim Final Rule supplementing the Initial Interim Final Rule with additional guidance regarding the application of affiliation rules (the “Second Interim Final Rule”). On April 6, 2020, the SBA released a list of frequently asked questions and answers that provided guidance on a number of issues related to the Payroll Protection Program Loans. As of the date of this updated memorandum, there remains a strong lobbying effort from several impacted constituencies and letters from members of Congress sent to the SBA Administrator to, among other things, further clarify the affiliation rules to provide a further bright-line test. On April 9, 2020, the SBA released the Paycheck Protection Program Lending Facility Term Sheet (the “Term Sheet”). On the same day, the federal bank regulatory agencies announced an Interim Final Rule modifying the agencies’ capital rules to neutralize the regulatory capital effects of participating in the Paycheck Protection Program (the “Regulatory Capital Interim Final Rule”).
This updated memorandum supersedes the Firm’s April 7th memorandum on this topic and covers the latest available information on the 7(a) Loan Program and EIDLP loans which are impacted by the recent legislation.