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If you are a US based business who has had to suspend, or reduce, operations as the result of the Coronavirus pandemic, financial aid is on the way to help you keep your employees and pay your bills. Foreign owned US based businesses may also take advantage of the financial aid.

On April 2, 2020, the US Small Business Administration (the "SBA") issued its interim final rules (Rules) initiating the Paycheck Protection Program (the "PPP"), established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted into law on March 27, 2020. The purpose of the Cares Act is to provide emergency assistance to individuals, businesses, and healthcare facilities impacted by the 2020 coronavirus pandemic.

The PPP is a loan program designed to help shore up the finances of employers, who have had to suspend or reduce operations as the result of the Coronavirus pandemic. The loans would cover payroll costs and, among others, most mortgage interest, rent and utility costs. Significantly, foreign owned US based businesses may also take advantage of the PPP.

The following are important features of the program:

  • the PPP is for US based small businesses with 500 or fewer employees (including sole proprietorships, independent contractors, self-employed persons, private non-profit organizations, and 501(c)(19) veteran’s organizations) affected by Coronavirus. Businesses in certain industries, who have more than 500 employees, may also take advantage of the program if they meet the SBA’s size standards for those industries;
  • the loan amount is calculated according to the methodology stated in the Rules and is subject to a $10 million cap;
  • borrowers may apply for PPP loans through financial institutions that are existing SBA lenders or as established by the Rules, which covers most banks. SBA’s advice is to consult with your local lender to find out if they are participating in the program; 
  • lenders began processing loan applications on April 3, 2020. The deadline to file a PPP application to take advantage of the program is June 30, 2020. However, the Rules expressly state that the PPP is a "first-come, first-serve" program, so applicants should file their PPP loan applications as soon as possible;
  • lenders may not require, as a condition for a business receiving a PPP loan, that a business pledges any collateral, or extends a personal guaranty, as well as any fees;
  • the main purpose of the PPP is to keep workers on the applicant’s payroll. The majority of the proceeds of the loan must be used to cover payroll costs. The PPP loan may also be used, among others, to cover mortgage interest, rent payments, and utility costs;
  • PPP loan repayments have been deferred 6 months under the Rules. Subject to being forgiven, a PPP loan shall be repaid within 2 years of being granted at the interest rate of 1.0% per annum;
  • if a business uses its PPP loan to cover the costs as established by the Rules, the loan could be totally forgiven.

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For any further information

Hanz Giovanni Chiappetta hchiappetta@lawtelier.it

Robert Ian Goodman rigoodman@lawtelier.com

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