New guidance was recently issued by the Treasury that provides clarification surrounding eligibility for PPP loans through FAQ 31.
Although the question relates to companies owned by other large companies (e.g., owned by a Public Company, Private Equity or Hedge Funds); based on the guidance issued in FAQ 31 companies that are unable to show immediate harm from COVID 19 OR may have access to other funding (e.g., Private Equity, Hedge Fund, or other lending sources) may need to pay back the PPP loans by May 7th as good faith certification.
Many are calling this the Shake Shack Rule. This has nothing to do with forgiveness, but eligibility to receive the PPP loan funds in the first place.
Accordingly, it is imperative that you update your current accounting practices to include detailed reporting functions to properly segregate and track the receipt and expenditures of funds obtained through both the PPP Loans and CARES Act Section 3610 funding, as well as tracking/reporting the negative impact of COVID-19 on your financial operations for eligibility purposes.
With the passing of the CARES Act, small businesses (generally ones with less than 500 employees) became eligible to apply for the Small Business Administration (SBA) Paycheck Protection Program (PPP) Loans as stipulated in the CARES Act. As our COVID-19 Relief Team has been fielding questions surrounding the CARES Act provisions, many of them point to the specific information Government Contractors must be aware of when considering the funding options available.
Besides the recent guidance issued by the Treasury, multiple Federal agencies (e.g., OMB, DPC, DIA) have issued memorandums and FAQ documents to help government contractors regarding Section 3610 of the CARES Act and PPP Loans. As new guidance is released, and contractors are receiving, or on the cusp of receiving, their PPP funds, utilization of these funds, and implications of Section 3610 must be closely examined.
It is important to note the need for government contractors to review the guidance that comes out from the various agencies and departments to gather an understanding of the potential complexities surrounding both PPP loans and Section 3610 funding.
We are taking a diligent approach to reviewing the information being issued by Federal agencies and will continue to provide updates. In the meantime, if you have any questions about this information, please Contact Us or Submit Questions here as we are populating a FAQ specific to this topic.