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PPP Reboot Likely to Include Second Round of Funding for Distressed Businesses

As Congress scrambles to craft the next phase of COVID-19 stimulus and relief legislation, both sides of the aisle appear to be in agreement on expanding the Paycheck Protection Program (PPP) to include more funds for small businesses that have already received a PPP loan. While differences remain between the proposals put forth by the Senate Democrats and Republicans, a common framework is beginning to emerge, strongly suggesting that the final legislation will include a new round of much-needed funding for small businesses impacted by the pandemic.

The Health, Education, Economic Assistance, Liability and Schools (HEALS) Act, proposed this week by Senate Republicans, includes $190 billion for so-called “PPP Second Draw Loans.” Similar to the original PPP program under the CARES Act, it includes a maximum loan size of 2.5 times a company’s average monthly payroll costs and imposes a requirement that at least 60% of the loan proceeds be used for payroll. To be eligible for a second loan, however, a business must meet the SBA’s revenue size standard (if applicable), must have no more than 300 employees and must demonstrate at least a 50% reduction in gross revenues during the first half of 2020, as compared to the same period in 2019. Notably, the Republican proposal excludes publicly-traded companies from receiving second-round funding, as well as business in the financial services sector and entities affiliated with entities in the People’s Republic of China.

The Democrats’ plan calls for a “Prioritized Paycheck Protection Program” or “P4” loan, the terms of which are directionally similar to the Republicans’ proposal. It would be limited to companies with 100 or fewer employees that would also need to demonstrate a 50% revenue loss. Like the Republican plan, publicly-traded companies would be excluded from the P4 program.

Both proposals include provisions that should ease the process of applying for forgiveness--a procedure that up until now has been a source of confusion and frustration for both borrowers and lenders. The Republican proposal provides a simplified application procedure for loans up to $150,000 where borrowers can obtain forgiveness based only upon an attestation of a good faith effort to comply with the PPP loan requirements. Likewise, for loans up to $2 million, borrowers would need to complete required certifications, but would not need to submit documentation when seeking forgiveness. Democrats who have expressed concerns over the existing procedures for obtaining loan forgiveness are likely to agree to these types of simplification measures.

Finally, legislation clarifying the deductibility of expenses related to PPP loan forgiveness remains an issue that appears to have support from both Democrat and Republican lawmakers. Such a measure would make clear that borrowers are permitted for tax purposes to deduct expenses that relate to the forgiven amount, such as payroll, employee benefits, rent and utilities. While deductibility was not addressed in the Republican’s most recent proposal, it did appear in earlier drafts and is expected to reemerge as an agreed-upon feature of the final legislation.

© 2023 Bracewell LLPNational Law Review, Volume X, Number 211

About this Author

David Shargel, commercial litigation, white collar criminal defense attorney, Bracewell Law firm

David Shargel is a senior counsel in the trial section of Bracewell's New York office. His litigation practice focuses general commercial litigation, internal investigations and white collar criminal defense. Mr. Shargel's practice also involves issues surrounding electronic discovery and data management.

Mr. Shargel has litigated complex commercial disputes involving contract, business torts, insurance coverage, technology and fraud, and has litigated disputes concerning federal and state constitutional law, including the Commerce and Due...

Rachel goldman, complex commercial litigation, attorney, Bracewell law

Rachel Goldman is an experienced litigator in both federal and state courts, at the trial and appellate levels. Her practice focuses on complex commercial matters, including claims for breach of contract, post-acquisition disputes, class actions, False Claims Act cases, insurance coverage disputes, contested bankruptcy matters, challenges under the Commerce Clause and the Supremacy Clause, government regulation, securities litigation, construction law, First Amendment and libel actions. Additionally, Rachel's tenure as in-house counsel provides a valuable perspective of...

David Ball, Intellectual Property Attorney, Bracewell Giuliani, law firm

David J. Ball is a partner in Bracewell's litigation practice. David has experience in the areas of intellectual property litigation (patent, copyright, trademark, trade dress, and IP theft), bankruptcy litigation, and state and federal appeals.  He also regularly represents financial services firms (international banks, regional banks, hedge funds, etc.) in complex commercial disputes.  David routinely draws on his litigation experience to counsel clients in all manner of business transactions, including risk analysis, contract formation, mergers and acquisitions, and...

Josh Zive, Legislative Regulatory Advocacy attorney, Bracewell law firm
Senior Principal

Josh Zive is a senior principal at Bracewell with an eclectic background in legislative and regulatory advocacy, campaign finance and ethics laws, strategic communications and issues related to international trade and economic sanctions. He works closely with associations and companies involved in legal and political controversies to craft and deliver arguments that can be successful with legal, political and public audiences. No matter the forum or the specific controversy, Josh strives to serve as trusted counsel for his clients and to provide timely and practical...

Liam Donovan Bracewell

Liam Donovan develops effective advocacy and communications strategies for clients on tax, infrastructure, energy and other public policy issues, and helps guide these clients through the federal legislative and regulatory process.

Liam joined Bracewell from Associated Builders and Contractors (ABC), where he served as ABC’s lead on tax, energy and fiscal legislative issues for more than six years, representing the construction industry before the House, Senate, White House and federal agencies, while providing strategic guidance on the association’s political activities. He also...