• New (first-time) applicants that did not receive a PPP loan in 2020 may now apply (max loan amount of $10 million)
• A qualifying business that previously received a PPP loan in 2020 may apply for a “Second Draw” PPP loan under certain circumstances (max loan amount of $2 million) if the business:
• Exhausted all funds from the first PPP loan;
• Employs no more than 300 employees; and
• Experienced at least a 25% a decline in gross receipts in Q1, Q2, Q3, or Q4 2020 as compared to the same quarter in 2019
• Both first and Second Draw PPP loan applications must be made by the current deadline of March 31, 2021
• Applicants may now choose their own covered period in which to spend the PPP loan proceeds (minimum of eight weeks up to a maximum of 24 weeks), providing more flexibility for workplace decisions
• PPP loans are not included as taxable income, and expenses paid with PPP funds are now tax deductible
• Expanded eligible non-payroll expenses may now include operational expenditures such as software, PPE, and safety improvements like air filtration and employee health screenings
• A further streamlined one-page forgiveness application for all PPP borrowers with loans under $150,000

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Cohen joins Weiss Serota after operating his own boutique firm for more than 20 years. He previously served as general counsel for a Florida-based national bank and outside general counsel for numerous banks and lenders. Cohen has expertise in banking law, commercial finance, regulatory compliance, commercial transactions and commercial litigation.

“Lewis is a tremendous addition to our Miami office and demonstrates our commitment to expanding our statewide complex commercial transaction practice,” said Miami Office Managing Director Mitch Bierman. “His creativity and his deep understanding of banking operations, regulatory frameworks and complex transactions complements the diverse expertise of our business attorneys.”

Cohen’s practice involves advising and representing banks in a variety of matters, including deposit operations, lending limits, online and mobile banking, vendor contracts, loan operations, commercial finance, loan documentation and regulatory matters. He also represents banks, individuals, and investors with respect to new loan transactions and modifications, real estate purchases, and sales and leasing of branch office facilities.

“I am thrilled to join such a terrific group of attorneys,” said Cohen. “The firm’s zoning, land use, municipal law, litigation and bankruptcy groups are a great complement to my practice, and I look forward to bringing my banking, finance and real estate experience to the firm’s existing Business Transactions Division.”

Cohen earned his Juris Doctor from Stetson University College of Law and a Bachelor of Arts from Boston University.

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As the coronavirus continues to wreak havoc on the economy, many homeowners have been unable to make their mortgage payments. The CARES Act contains provisions to help borrowers, which allows homeowners facing hardship due to the coronavirus pandemic to obtain mortgage forbearance for up to one year.

“Borrowers should understand the lender is not waiving those payments but temporarily suspending the collection of those payments,” said Drew. “Once payments are suspended, the lender is not able to issue negative reporting to the agencies.” As with any major financial decision, he also advised, “If it’s going to be a longer-term program, you could ask your lender if you can restructure the loan.”

Click here to view the full article.

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Importantly, as of this writing, the Act is still pending signature by the President before it becomes binding law.  However, because 1) the PPP Flexibility Act fundamentally overhauls the PPP Loan program, and 2) the President’s approval of the Act appears to be imminent, this information is being provided to aid borrowers who continue facing difficult PPP loan spending decisions.

Key points from the PPP Flexibility Act

• Extends the “Covered Period”: The covered period for the use of PPP loan proceeds has been tripled from eight weeks from loan origination to 24 weeks (or December 31, 2020, whichever comes first);  notwithstanding, current PPP borrowers may still elect to use an eight week covered period
• New “60/40 Rule”: The minimum percentage of PPP loan proceeds used for eligible payroll expenses has been reduced from 75% to 60%, and the corresponding percentage of eligible non-payroll expenses (mortgage interest, rent, and utilities) has been increased to 40% (replacing the previous “75/25 rule”)
• 60% Forgiveness “Cliff”: While the CARES Act previously reduced forgiveness on a dollar-for-dollar basis for spending outside the payroll/non-payroll ratio, the PPP Flexibility Act creates a “cliff” that eliminates all forgiveness if the borrower fails to meet the 60% payroll spending threshold
• Retroactively applies to all PPP loans (except the maturity date in existing loan documents, which lenders and borrowers can modify)
• Extends loan maturity to five years (previously two years) for all loans made on or after the PPP Flexibility Act becomes law;  explicitly permits current PPP lenders and borrowers to modify existing loans to achieve this extended maturity
• Two additional forgiveness exceptions: A borrower’s forgiveness won’t be reduced or eliminated for failing to restore its pre-pandemic workforce if it can document 1) an inability to rehire employees or find qualified replacement employees, or 2) an inability to restore “the same level of business activity” that it enjoyed before Feb. 15, 2020 due to COVID-19 related operating restrictions (social distancing, health and safety compliance, etc.)
• 10 Months To Seek Forgiveness: A borrower has 10 months from the last day of the covered period to apply for forgiveness, otherwise loan payments begin automatically
• Extends loan deferral period for Borrower’s first loan payment from six months to the time the SBA makes its forgiveness decision
• Extended Safe Harbor to December 31, 2020 to employers seeking to restore full time equivalent employment levels (previously June 30, 2020)
• Eliminates Prohibition on Payroll Tax Deferral: Borrowers may now take advantage of payroll tax deferral under the CARES Act (eliminating the prior restriction applied to PPP loan recipients)

PPP loan borrowers, specifically those approaching the end of their 56 day covered period should be aware of these significant changes and the newfound flexibility in the PPP loan program.  Our firm is ready to assist you in navigating your PPP loan forgiveness issues and advise you with respect to other public and private lending opportunities related to COVID-19’s impact on your business.

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Key points from the application

• Clarifies a $15,385 per individual maximum payment from PPP loan proceeds
• Clarifies that both real and personal property lease payments are eligible non-payroll expenses; i.e. automobile lease payments and equipment lease obligations should qualify for the 25% maximum non-payroll portion
• Specifically includes “transportation, telephone, or internet access” as additional eligible utility expenses
• Creates an elective “Alternative Payroll Covered Period”:  Borrowers with a biweekly or more frequent payroll may choose to delay the start of their 56 day covered period to coincide with payroll cycles
• Clarifies that Eligible Payroll Costs include both “costs paid” and “costs incurred” during the 56 day covered period;  a Borrower may use PPP funds for payroll “costs incurred” (W-2 salary or wages earned in the covered period) after the end of the covered period “if paid on or before the next regular payroll date”;  this suggests that Borrowers who elect not to use an Alternative Payroll Covered Period will need to pro-rate their final payroll to coincide the covered period
• Outlines supporting documentation that must accompany the application
• Borrower must affirmatively designate if its PPP loan exceeds $2 million
• Confirms the June 30, 2020 “FTE Reduction Safe Harbor” deadline by which a Borrower may restore its FTE employee levels to Borrower’s pre-pandemic levels, as measured against  “Borrower’s pay period that included February 15, 2020”

PPP loan funds remain available and lenders continue to accept new applications.  Our team is available to assist you in navigating through the complexities of the PPP loan forgiveness application and advise with respect to other public and private lending opportunities related to COVID-19’s impact on your business.

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Since the Paycheck Protection Program (PPP) went live on April 3, 2020, over four million businesses across the country have been approved for PPP loans across two rounds of federal funding.  Through May 8, 2020, the United States Small Business Administration (SBA) approved over $530B in PPP loans, which are administered through SBA approved lenders.

The PPP loan program has been the subject of significant public scrutiny amid concerns that it benefitted larger companies with questionable need to the exclusion of small business concerns with significant need.  In response, Congress approved a second round of funding for the PPP loan program with an emphasis on smaller lending institutions, and the Treasury Department indicated that it will exercise heightened auditing and oversight over the loans.  In late April, Treasury issued guidance recommending that borrowers revisit their PPP loan certifications of need based on “[c]urrent economic uncertainty” to determine if they were truly eligible to receive the PPP loan. Specifically, Treasury’s responses to FAQ’s 31 and 39 in late April, 2020 “reminded all borrowers” of the need certification requirements and indicated that the SBA will review all loans over $2 million, “in addition to other loans as appropriate.”  These comments, in conjunction with the lack of criteria concerning how need and certifications will be evaluated, has caused uneasiness among borrowers that received PPP loans and began spending those funds weeks ago.

May 13, 2020 Guidance

On May 13, 2020, the Treasury Department issued updated guidance that clarified its position on the above issues and created additional safe harbors to PPP loan recipients.   This guidance should provide meaningful comfort to PPP loan recipients both under and over the $2 million loan threshold.

Loans under $2 million

The first safe harbor benefits small businesses that received a PPP loan under $2 million. Specifically, Treasury indicated that “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” (FAQ 46).   Essentially, the guidance suggests that 1) small businesses receiving smaller PPP loans were less likely to abuse the program, compelling less scrutiny by the SBA over loan compliance, and 2) the SBA does not wish to expend its “finite audit resources” on smaller balance loans.

Loans over $2 million

While the May 13th guidance confirms that the SBA will review all loans over the $2 million threshold without affording those borrowers a presumption of good faith, the Treasury Department’s guidance offers some latitude to borrowers receiving larger loans.  The guidance appears to soften the Treasury’s prior comments targeted towards larger loan recipients, implying that a borrower’s “individual circumstances” and the language in the SBA guidance and the good faith certification may have created an “adequate basis” for the borrower to seek a PPP loan.   Importantly, where the SBA deems borrowers of these larger PPP loans ultimately lacked an adequate basis to claim a need for the loan, 1) the loan will not be subject to forgiveness and must be paid back, and 2) upon repayment, the borrower will not be subject to “administrative enforcement or referrals to other agencies”.

Safe Harbor to Return PPP Funds

In addition, the updated guidance extended the safe harbor for a borrower to return improperly received PPP loan funds to May 18, 2020. (FAQ 47).   The date was extended from the initial May 7, 2020 deadline due to the timing of the updated guidance.

Questions Remaining

Most importantly, the May 13, 2020 guidance failed to clarify a number of outstanding questions regarding borrowers’ real time PPP loan spending or the mechanics of how loan forgiveness will work. Borrowers and industry trade groups continue awaiting clarification from the SBA concerning issues of how payroll cycles and non-payroll expenses may be adjusted in the eight week (56 day) covered period.  Since the covered period begins on the date the PPP loan is funded by the lender, the timing of the loan often does not coincide with a borrower’s payroll cycle or its ability to meaningfully reopen the business in light of government restrictions.  Additional questions that remain unanswered surround the borrower’s payment of bonuses, pre-payment of rent, and whether cellular phone and internet plans classify as eligible non-payroll utilities eligible for PPP loan spending.

Until specific guidance is issued on these topics, we suggest borrowers continue maintaining meticulous records of PPP loan spending and closely monitoring their compliance with the “75/25 ratio” of payroll to non-payroll expenses during the covered period.

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The Firm has become an authorized Remote Online Notary Service Provider offering the service firm wide.  While the current COVID-19 Health Emergency is limiting the ability of lenders, borrowers, title companies, and individuals to meet face to face to close real estate transactions and loans, our Firm’s Remote Online Notary services can assist any client with closing transactions, and provide all parties involved with a simple process for executing closing documents.  With Remote Online Notarization, a signer personally appears before the Notary at the time of the notarization using audio-visual technology instead of being physically present in the same room, resulting in a safe, secure and efficient method for closing any transactions.  On behalf of our clients, the Firm also utilizes e-signature solution services to allow for electronic signatures on those documents that do not require a Notary’s acknowledgement, and e-recording for prompt recording of deeds, mortgages, and other transactional documents in the public record.  With the latest technology, the Firm is available to assist with all legal aspects of your transaction during these challenging times.

If you have any questions or to obtain more information on how you can access the Firm’s Remote Online Notary Services or other services related to your transaction, please contact any member of our Property or Business Transactions Divisions.

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As the coronavirus continues to jolt the economy, more than 3.4 million Americans are in mortgage forbearance plans, which allows them to pause payments for a month to as long as a year. “The only situation in which the loan interest might change is if the lender extends the loan maturity date or increases the loan interest rate,” Drew said. He points to three key questions borrowers should ask.

• Do I have to pay interest or escrow advances during this time, or is this a complete payment deferral?
• Is the loan maturity date being extended?
• Will the lender recapture the deferred through a balloon payment at loan maturity, an extended maturity date, or some other catch-up method?

“A deferment agreement is a modification and amendment to the loan documents, which requirements a clear understanding of the parties’ respective rights and obligation,” he explains.

Click here to view the full article.

The post Andrew Demers Discusses Mortgage Forbearance During the Coronavirus Pandemic appeared first on Weiss Serota Helfman Cole + Bierman.

The PPP Enhancement Act is a $484 billion relief package that appropriates additional federal funds to address the COVID-19 crisis, as follows:

• Appropriates an additional $310 billion for the PPP loan program, bringing the total funding of the PPP loan program to $659 billion;
  • $60 billion carve out of PPP loan funds for smaller lending institutions
    • $30 billion for lending institutions and credit unions with capitalization of at least $10 billion but no larger than $50 billion
    • $30 billion for smaller credit unions and community development lenders
  • Appropriates an additional $50 billion for the SBA’s Economic Injury Disaster Loan (EIDL) loan program
  • Appropriates an additional $10 billion for the SBA’s EIDL emergency grant program
  • Appropriates an additional $100 billion to the ‘Public Health and Social Services Emergency Fund’’ for healthcare related expenditures
  • Additional funding of federal salaries related to the foregoing programs

PPP Loan Program

Effective Monday April 27, 2020, the SBA resumes funding small business loans under the Paycheck Protection Program (PPP) with an additional $310 billion injection.  This second round of PPP loan funding comes just four weeks after the PPP loan program was established in the $2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES Act) enacted on March 27, 2020.  In its PPP Loan Report published on April 16, 2020, the SBA reported over 1.6 million PPP Loans had been applied for with an average overall loan size of $206,000.

Our prior summary of the PPP loan program is found here.

Since passage of the CARES Act, the initial $349 billion in PPP loan program funding was quickly depleted, with some controversy surrounding the program and its administration. Some critics  questioned the “first come, first served” implementation of the PPP loan program by eligible lenders, the timeliness of loan funding, and the receipt of PPP funds by larger public companies.  In its efforts to address some of these concerns, the Treasury Department issued supplemental guidance for the PPP Program on April 23, 2020 and again on April 26, 2020.  The guidance further restricts borrower eligibility criteria for the PPP loan program.   The Treasury Department specifically appeared to tackle the criticism head on by stating “ . . . it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith…”

EIDL Loan Program

The PPP Enhancement Act also infuses an additional $60 billion into the SBA’s Economic Injury Disaster Loan (EIDL) loan program.   As with the PPP loan program, significant demand for EIDL loans in the wake of the CARES Act resulted in a lapse in appropriations for the EIDL program.

Unlike the PPP loan program, the EIDL program is directly administered by the SBA and not through approved lenders.   As of April 24, 2020, the SBA reported nearly $8 billion in approved EIDL loans in response to the COVID-19 crisis.

EIDL loans offer very different features and terms from PPP loans.  EIDL loans are capped at a maximum of $2 million, carry a higher interest rate, and may require a personal guaranty over  certain loan amounts.  While PPP loans offer the potential for complete loan forgiveness, only $10,000 of the EIDL loan (an Emergency EIDL grant or loan advance) may be forgiven.

The business lending attorneys at Weiss Serota Helfman Cole & Bierman stand ready to assist clients in evaluating their business lending needs.  We can advise you in gathering due diligence, completing applications, and engaging with SBA Preferred Lenders and the SBA to process your applications as soon as possible.

The post Congress Extends Critical PPP and EIDL Small Business Funding in $484 Billion Supplemental Stimulus Bill appeared first on Weiss Serota Helfman Cole + Bierman.

“Big lenders may have prioritized the ‘cleanest’ PPP applications, which usually come from larger companies that have the means to outsource accounting and payroll to professionals,” he said. Drew explained that small businesses with fewer than 10 employees usually don’t have the funds to pay a third party to handle financials, which may have led to applications with errors or information that was difficult to verify. “That can hold up underwriting for the loan and, ultimately, SBA approval.”

Drew advised the clear path to SBA approval is for businesses to have their documents organized and verified as quickly as possible.

Click here to view the full article.

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