Paycheck Protection Program Guidance Issued as $321B More Loan Funds Become Available

Shutterstock / Andrey Popov

Funds are expected to dry up quickly — and the Treasury Department is reminding businesses they must certify that their application is "necessary."

As Congress approved another $321 billion for the Small Business Administration's Paycheck Protection Program, the Treasury Department issued a Q&A addressing some of the more queried parts of the process. 

One of the questions is clearly aimed at sharp criticism of companies who disclosed that they received PPP funds but didn't appear to "need" the money and most wouldn't describe as a "small business" — attention which prompted Shake Shack to return the $10 million it received. 

It's the last question on an 11-page document and reads, "Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?" Complicated affiliation and ownership guidance aside, it's effectively asking whether businesses that would survive without the help should be eligible to receive it and who is tasked with making that determination. The answer? Applicants are expected to use the honor system and banks are allowed to trust them. 

"[B]efore submitting a PPP application, all borrowers should review carefully the required certification that '[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant,'" states the document. "Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business."

One thing for Hollywood workers to remember: Loan-out companies are eligible, along with independent contractors and other sole-proprietors, and whether the person qualified for a stimulus check doesn't affect that eligibility.

While many business managers used to advise holding off on forming a loan-out until income topped $250,000 or more, which is well above the stimulus cut off, the 2018 Tax Cuts and Jobs Act lowered that bar. So, there may be people in the industry who have a loan-out and fall under the adjusted gross income level of $99,000 for an individual or $198,000 for married people filing jointly.

"In theory, there may be some people who get money from the stimulus and PPP money as a business," says Greg Zbylut, a tax law expert at business management firm Singer Burke. "It is kind of a double dip, and yet the government views them as separate entities."

Despite the refilled well of funding, it is expected that the money won't last long. The first round dried up within two weeks — and this pool is $28 billion smaller, with countless applications still on file and already in line.