April 28, 2020
In new final regulations issued on April 24, 2020, the Small Business Administration has stated explicitly what the loan application form stated implicitly – applicants for Paycheck Protection program loans that are a debtor in a bankruptcy proceeding are not eligible for PPP loans. The first question on the standard application for a PPP loan suggested as much, but this is the first formal acknowledgement that the SBA is using this rule to disqualify debtor-applicants. In addition, if an applicant for a PPP loan becomes a debtor in a bankruptcy after it submits its application but before any loan proceeds are disbursed, it is the applicant’s obligation to notify the lender and request cancellation of the application. Failure by the applicant to do so will be regarded as an unauthorized use of PPP funds.
As always, the business lawyers at RCO Law stand ready to counsel you on COVID 19-related business issues.
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