Requirements For New Ppp Loan

Requirements For New Ppp Loan – There is so much confusion and misinformation about government-sponsored “payday protection plan” loans for companies that every small business CEO in the country should pay attention to. We’ve advised many entrepreneurs, so I thought I’d “open source” some of the advice I shared.

I don’t claim to be the world’s expert on this. But I’m in close contact with NVCA, many of the big law firms and many of the top VC firms. Together with my partner Stuart Lander, who runs operations at Upfront and is a former attorney, we have analyzed, debated, and helped many companies make this decision. So my only goal is to give you some insight into our conversations in case you don’t have the same strategy or advice.

Requirements For New Ppp Loan

I am not a lawyer, and you cannot use my advice for the basis of your application, but I prefer to provide more public information to help you have the right conversations, so please take this post as is ( and acknowledge that I may have typos or inaccuracies, which I will change if pointed out).

Sba Ppp Loan Application Process Is A Nightmare For Lenders And Their Customers. It Doesn’t Have To Be.

If your US-based business has been so adversely affected by Covid-19 that you need to lay off employees immediately and having access to capital will allow you to keep more employees on the payroll, you may be eligible. You should:

The CARES (Coronavirus Aid Relief & Economic Security) Act provides $2 trillion to businesses and individuals affected by Covid-19.

$350 billion of this money is dedicated to small businesses under a loan program called PPP (wage protection plan). This money is administered by the SBA (small business administration) and is received through an approved bank that reviews your application.

The purpose of the program is in the name – payroll protection. The US government believes that keeping more workers employed, even if they are not immediately productive due to WFH (work from home) or lost income is better than laying off all these workers, where they are likely to have sought help through unemployment insurance. pretending There were 10 million requests in the last 2 weeks alone, the largest 2-week request in history. The government believes that it is not only better to keep employees in jobs if possible, but also help these businesses remain solvent.

Maximize Paycheck Protection Program (ppp) Loan Forgiveness

None of the rules state that VC-backed businesses are ineligible. Of course there are some people who say publicly that VC-backed businesses should not receive government money. There are some entrepreneurs who think it’s unethical for a VC-backed business with a highly educated founder, and there’s probably some populist outcry that the money should be earmarked for workers. on Main Street rather than for technology workers.

This is a matter of opinion or belief system, but not a matter of law or policy. The program is designed to keep employees on the payroll, so ultimately, it’s up to you to decide if you’re a worthy recipient and weigh the benefits to your company and your employees against the potential perception that the market is may (or may not) exist in the future.

One thing is clear. If you plan to lay off employees and if the PPP loan will help you keep more people on your payroll and ultimately believe that spending the next two months will allow you to use these people productively with your money in the future – this is precisely the goal of US government policy. Perception does not equal policy or law. If you want to be seen well in the future, make sure you have a good basis for applying and that you actually keep jobs.

If the US Government didn’t want to support VC-backed businesses, they could have easily excluded them, and they simply didn’t.

Ppp Loan Amounts Adjusted For Self Employed Business Owners

The short answer is “no”. Applying for a government loan created to serve America’s small businesses and workers during the economic crisis is not something you should do just because all your peers tell you to. This is not “free money”. You should apply if your business is struggling, if the loan will help you save jobs, if you are qualified and if you are supported by your board and your investors.

You can do it. It depends. The following lists how the loan program is calculated. If you maintain your level of employment at your current rate, much of this debt can be forgiven, but some of it is likely to be unforgivable. If you take a mass layoff (RIF), you can assume that you have to pay off your loan because the purpose of the loan is to protect jobs.

One of the most unfortunate aspects of the law is that it says that applications will be approved on a first-come, first-served basis. This means that every business that believes they qualify rush through their applications, which doesn’t leave much time for rational discussions with your stakeholders about whether or not they should, and it means that banks and lawyers are forced to hurry. I understand that in a crisis the government has to act quickly and fix things later. But this FIFO strategy creates an unnecessary sense of urgency. So unfortunately you have to rush things if you want to improve your chances of getting approved.

Banks have a difficult task. They don’t want to give loans and later they find out that they have given money to scammers. They have regulations that dictate things like KYC (know your customer) and AML (anti-money laundering) and other regulations designed to prevent abuse in our financial institutions. As a result, many banks only accept applications from existing customers and in some cases only customers with existing credit agreements. Additionally, some Main Street banks cannot process VC-backed applications because they are designed to handle locally owned businesses.

Ppp Loan Calculator And Ppp Loan Forgiveness A Complete Guide

The two main banks serving the VC industry are SVB (Silicon Valley Bank) and FRB (First Republic Bank) and both understand the intricacies of VC-backed businesses and are more than willing to help you.

Step 1 is to decide “am I eligible for a loan under the rules” and step 2 is to determine whether or not you can apply based on something called the “affiliate rule”. It’s complicated, but basically if a single VC can veto certain board-approved actions, then you’re violating the Affiliate Rule (or if a single company owns > 50%). There is a lot of chatter about companies owning > 20%. This is completely unrelated to the Affiliate Rule. The application form states that any owner > 20% must disclose certain information in the application process so it is often confused as relevant. Nope. Below are the NVCA (National Venture Capital Association) guidelines.

Nope. This is another misconception. The 20% threshold has nothing to do with eligibility. It only determines if you need to provide additional information.

To be clear, if a company owns 8% of your company but has negative blocking rights as described above in the NVCA guidelines, you are not eligible for the program unless you amend your legal governing documents.

Ppp Round 2: Everything You Need To Know

How do I change my legal documents so that the Affiliate Rule does not prevent me from applying for a loan?

To begin with, you’ll be asking for investor permission to amend your governing documents, and since some of these terms are negotiated to protect shareholder rights, they may approve the changes, but they may not.

I find it’s easier for VCs to change the governing documents when there are multiple VC investors so that no one has a greater majority of ownership than the others. This is because the subsidiary rule is only overridden if a company has blocking rights. Therefore, you can change the governing documents to a “simple majority of preferred shareholders” that can block one of the known policies of the subsidiary and not a single company. I found VCs to work with them to help entrepreneurs in this time of need.

It’s a bit more difficult if you’ve only done one A round and therefore only have one VC around the table who owns more than a majority of the preferred stock. In this case, they have to give up the right completely. If your company is struggling (say you are a transportation company or a hospitality company) then you are likely to find an acceptable investor. If you are in a company where the investor sees your application as a “grey area”, then it may not be easy for you to get approval for changes.

How To Start The Ppp Loan Payback Process

Finally, there is some discussion about how to “get around” the Affiliate Rule. Please be careful because having a “side agreement” (oral or written) to “return” the old agreement in the future is tantamount to fraud. You can explicitly mention that the governing documents are only valid for the term of the loan, but I believe you can open it

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