Legal Analysis of the Treasury Department’s Latest Guidance on the Paycheck Protection Program


Submitted by the AGC

At AGC’s urgent request, one of Washington’s leading law firms, Crowell & Moring, has provided the association with analysis of the Treasury Department’s latest guidance on the Paycheck Protection Program (PPP). That guidance provides, in short, that a construction company can qualify for a PPP loan even if the company does meet the small business size standard that applies to the company, provided that it has fewer than 500 employees.

In the process, Treasury’s new guidance appears to overrule the “interim final rule” that the Small Business Administration (SBA) issued late last week, where the SBA indicated that the program is only open to small businesses. On its face, and given its nature, the new guidance does not, however, dispel all doubt that a company above the relevant size standard — but with fewer than 500 employees – can now certify – as the PPP loan application continues to require – that at the time of applying for the loan, the company “is eligible to receive a loan under rules . . . that have been issued by the [SBA}.”

Crowell & Moring’s current view is that, yes, a construction company can now make that certification, even if the company does not meet the relevant small business size standard, if these three conditions are met:

  1. the company has fewer than 500 employees; and
  2. all of the information that the company provides to the lending institution in conjunction with its application form and all supporting documents are true and accurate; and
  3. the company is otherwise eligible for a federal loan pursuant to the Paycheck Protection Program.

The law firm adds that “successful enforcement actions” under the federal false Claims Act would be “unlikely” in the current scenario, and that loan applicants can “further bolster their position by noting on the face of [their] application[s] that they are relying on the government’s own FAQ documentation in support of their eligibility and certification.”

Crowell & Moring held a webinar today to discuss the “Paycheck Protection Program Essentials: Current Tripwires, Guidance, and Lessons Learned in the Sprint to Apply for Loans,” and it featured Ken Dodds of Live Oak Bank, a leading SBA lender and Crowell & Moring attorney and policy advisor.

The webinar also addressed program eligibility, the current SBA Form 2483 borrower application, and loan calculations and forgiveness based on the SBA’s interim final rules and guidance that have been issued in the past week. The webinar also provided insight into the lender perspective following the opening of the application period on April 3, 2020.

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