Analysis: Things for Businesses to Be Aware of When Applying for PPP Loan Forgiveness

Analysis: Things for Businesses to Be Aware of When Applying for PPP Loan Forgiveness

ABI Bankruptcy Brief

October 22, 2020

ABI Bankruptcy Brief

Analysis: Things for Businesses to Be Aware of When Applying for PPP Loan Forgiveness

U.S. lenders issued more than 5 million forgivable loans through the federal government’s coronavirus aid initiative for small businesses, the Paycheck Protection Program. The Small Business Administration in August started accepting applications to have the loans forgiven, and it began approving them this month. The Wall Street Journal has prepared a few things for businesses to be aware of when applying for PPP loan forgiveness:

- PPP borrowers should apply for forgiveness through the lender that issued the loan.
- To have the full amount forgiven, borrowers must spend at least 60% of their loan on payroll costs and may use the remainder of the funding for other eligible costs, such as mortgage interest, rent and utilities.
- The SBA and Treasury Department have issued three different application forms, and which one borrowers should use depends on the nature of their business, their loan size and whether they reduced employee head count or salaries and wages.
- A lender has 60 days to review the borrower’s application and submit it to the SBA. The agency then has up to 90 days to review the submission and issue a decision.
- Amid contentious negotiations in Washington over more coronavirus aid, many PPP lenders and small-business advocates are lobbying the Trump administration and Congress to further simplify the forgiveness process for loans under $150,000.

U.S. Jobless Claims Decline After California Resumes Reporting

The number of Americans filing for unemployment benefits fell for the third time in four weeks, suggesting that the labor market is still gradually recovering while remaining far from its pre-pandemic health, Bloomberg News reported. The progress last week was broad-based across states, and California resumed reporting after a pause, offering figures that improved the overall jobs picture. Initial jobless claims in regular state programs declined to 787,000 in the week ended Oct. 17, according to Labor Department data released today. Without adjustments for seasonal fluctuations, claims dropped by about 73,000. Continuing claims — the total pool of Americans on ongoing state unemployment benefits — fell by 1.02 million to 8.37 million in the week ended Oct. 10, although the number of Americans on extended unemployment benefits rose. That reflects people who exhausted regular state benefits. California reported that claims fell to 158,877 on an unadjusted basis, the first updated figures from the state since it paused processing for two weeks to whittle down a massive backlog and improve fraud prevention. The new numbers put national jobless claims on a lower path than previously reported, with initial filings for the week ended Oct. 10 revised down to 842,000 from 898,000.

Eviction Crisis Sparked by Pandemic Disproportionately Hitting Minorities

The eviction crisis exacerbated by the pandemic is hitting minorities much harder than other Americans, and experts are concerned the problem will only get worse in the coming months as the coronavirus recession drags on, The Hill reported. A review of more than 8,000 eviction cases by the Center for Public Integrity found that almost two-thirds of the tenants lived in areas with above-average minority representation with a median household income below $42,000. The thousands of evictions filed spanned late March to early July, primarily in Florida and Georgia. The Princeton Eviction Lab, which tracks evictions across 17 cities in the country, has recorded more than 60,000 evictions during the pandemic, with more than 1,500 happening over the past week. An August study by the Aspen Institute projected that anywhere from 30 million to 40 million Americans could be at risk of being evicted if nothing changes by Dec. 31, when the moratorium from the Centers for Disease Control and Prevention (CDC) expires. At the end of September, the National Council of State Housing Agencies released a report that says the debt that renters nationwide will collectively owe by the end of the year could be as high as $34 billion. During most of the pandemic, the federal government has had in place an eviction moratorium, first through the CARES Act and then through a policy implemented by the CDC. That policy is slated to expire at the end of the year, and experts say the jury is still out on how effective the moratorium between now and the end of year will be.

Senate Bill Would Outlaw Bank Discrimination for the First Time

Democrats in Congress have introduced legislation that would make it illegal for banks and other financial firms to discriminate against their customers because of their race, religion, sexual orientation and other characteristics — an effort meant to close a loophole in the Civil Rights Act, the New York Times reported. The Fair Access to Financial Services Act, introduced yesterday by members of the Senate Banking Committee, would explicitly outlaw discrimination against bank customers. Currently, it is legal for banks and some other businesses to treat some customers differently as long as those customers eventually receive the services they are seeking. That means, in practical terms, that banks can racially profile their customers and delay their transactions, or ask them to take extra steps to prove their legitimacy, without risking penalties as long as they eventually do business with those customers. The loophole stems from the specificity of the Civil Rights Act of 1964, which lists the kinds of businesses — including movie theaters, restaurants and hotels — where discrimination is prohibited. Courts have ruled that the law does not apply to any businesses not on the list. That leaves customers who say they have been mistreated with little recourse, especially in states like Georgia, where there are no statewide anti-discrimination laws. The bill stipulates that “all persons shall be entitled to the full and equal enjoyment of the goods, services, facilities, privileges and accommodations of financial institutions.” It is sponsored by Sens. Sherrod Brown of Ohio, Tina Smith of Minnesota, Cory Booker and Robert Menendez of New Jersey, Elizabeth Warren of Massachusetts and Chris Van Hollen of Maryland.

Means Test Numbers Set to Update on November 1

The Department of Justice has provided a table for cases filed on or after Nov. 1 for median family income data that has been reproduced in a format designed for ease of use in completing Bankruptcy Forms 122A-1 and 122C-1. Click here to view the table.

Amy Coney Barrett’s Supreme Court Nomination Advanced by Senate Committee

The Senate Judiciary Committee advanced Amy Coney Barrett’s nomination to the Supreme Court as Republicans unanimously voted to recommend that the full Senate approve her, paving the way for her confirmation next week, the Wall Street Journal reported. The tally was 12-0. All 10 Democrats on the panel declined to appear at the proceedings to protest the Republican plan to fill the position just ahead of a presidential election. The committee action clears the way for a full Senate vote that is expected on Monday. Senate Majority Leader Mitch McConnell (R-Ky.) is expected to take the rare step of keeping the chamber in session over the weekend in order to limit the opportunities for Democrats to delay the vote. (Subscription required.)

Insolvency 2020 Virtual Summit Sessions Conclude with Look at What Trends May Lie Ahead for Bankruptcy Filings

The Insolvency 2020 Restructuring, Insolvency and Distressed Debt Virtual Summit concludes next Tuesday with a final session sponsored by Epiq examining current filing trends and what practitioners should expect moving forward. Upcoming events include:

• ABI Talks
• Municipal Insolvency in the Time of COVID-19
• Sensible Alternatives to Reorganization 

Oct. 26
• A Walk on the Lit Fi Side: A Live Case Study on How the Litigation Finance Deal Process Really Works, sponsored by Burford

•  Premier Sponsor Showcase: CohnReznick 

Oct. 27
• Bankruptcy by the Numbers: The Next Chapter in Filing Trends, sponsored by Epiq 
• Summit Closing Ceremony 

Don’t miss great programming from Summit partners NCBJ, American College of Bankruptcy, CLLA, ABC, NYIC and ABA!

Sixteen leading insolvency organizations are participating in the Virtual Summit to bring thought leaders from the worlds of restructuring, insolvency and distressed debt for insightful online programming and engaging networking via a state-of-the-art virtual platform. With more than 50 hours of educational content, you will be able to meet your 2020 CLE needs! Replays of the panel sessions are available through March 2021. For more information and to register, please click here.

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New on ABI’s Bankruptcy Blog Exchange: OCC Undermines Own CRA Rule by Putting Key Metric on Hold

Delaying a proposed benchmark for grading banks' performance in Community Reinvestment Act exams to appease critics of its initial proposal will make it harder to gauge the final rule’s impact, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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