New Guidance on PPP Loan Eligibility: Hedge Funds, PE Funds, and Businesses with Access to Liquidity

Many Israeli companies have operations set up in the US, thus have been adversely affected by COVID-19 on both the Israeli and American fronts.The US government recently announced adding additional funds to the PPP loans, making it possible for eligible companies, certain Israeli corporations included, to apply for funding. The US government also provided additional clarifications as to its position regarding the eligibility of companies to borrow, particularly businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations.

On April 16, 2020, the $349 billion Paycheck Protection Program (PPP), overseen by the Small Business Administration (SBA), ran out of funding as companies applied for relief. On April 24, 2020, an additional $310 billion was made available for PPP loans. Since the PPP funds ran out, there has been a public focus on companies that applied for and received PPP loans. Indeed, certain entities have announced that they planned to return funds received under the PPP or as part of other programs under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). On April 23, 2020, the SBA and Treasury Department issued guidance (released in the form of an FAQ) (FAQ Guidance) with respect to businesses owned by large companies that have received PPP funds, highlighting the complex affiliation rules and a key required certification involved in obtaining a PPP loan. The FAQ Guidance was re-emphasized in new rules that were issued on April 24, 2020 by the SBA. In both cases, the SBA stated that any borrower who applied for a PPP loan prior to the guidance and who repays its loan by May 7, 2020 will be deemed to have made its certification in good faith.

In addition to the specific certification highlighted in the FAQ Guidance and new rules discusses in the full Alert, each application requires certifications that information provided therein is true. An applicant may be exposed to significant legal consequences for false certifications or false statements. Each application is also subject to potential public disclosure under the Freedom of Information Act.

While the PPP rules (particularly the affiliation rules) can be complex, the SBA and Treasury Department have provided some clarification over the past few weeks. Borrowers (and potential borrowers) should consider their applications and applicable rules carefully with counsel, as appropriate, in light of these current developments and the safe harbor period ending on May 7, 2020.

Greenberg Traurig’s Tel Aviv office attorneys who are members of the firm’s COVID-19 Economic Stimulus Team include Labor & Employment Shareholder Meira Ferziger as well as Of-Counsel Ephraim Schmeidler and Associate Aaron Katz of the Corporate Practice. Our team caters to the various legal needs of Israeli clients, specifically in facing the complex and dynamic front of the effects of COVID-19.

Read the full GT Alert, “New Guidance on PPP Loan Eligibility: Hedge Funds, PE Funds, and Businesses with Access to Liquidity“