Pub. 12 2021 Issue 1

www.wvbankers.org 22 West Virginia Banker PPP Round Two and Beyond By Matthew Kingery, Lewis Glasser, PLLC A ccording to the U.S. Small Business Administration’s 2018 Small Business Profile Report, U.S. small busi- ness accounts for 99% of the businesses in the U.S., and more than 47% of all U.S. employees. Small business has often been referred to as the backbone of the U.S. economy. It is no secret that COVID-19 has resulted in financial distress for many of these small businesses. The first round of the Pay- check Protection Program (“PPP”) was designed to address the financial hardship created by the COVID pandemic and experienced by this hugely significant sector of the economy. Round two of PPP is here with the same goal in mind, but the program has undergone significant changes designed to infuse more deserving small businesses with the cash necessary to continue operations. As the Biden administra- tion takes shape, more changes to COVID relief programs are sure to come. In fact, a new round of stimulus legislation was proposed on his second day in office and started making its way through the legislative process. The first round of PPP provided short-term financial assistance to small businesses dealing with the impact of the COVID-19 pandemic. The program originated in Congress in March 2020 as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), and was intended to guarantee eight weeks of payroll and other costs to help those business- es remain viable and allow their workers to pay their bills. The PPP Flexibility Act of 2020 relaxed many PPP loan guidelines. The original deadline to apply for a PPP loan was June 30, 2020, but was extended through Aug. 8, 2020, by legislation signed on July 4, 2020. As stories came to light of certain companies receiving PPP funding, like Kanye West’s Yeezy clothing brand, Treasury implemented a rules change; it became necessary to demon- strate that firms applying for PPP loans did not have access to alternative streams of capital. Potential criminal liability also led to roughly 30% of businesses that had collected PPP funds to return them. This potential criminal liability also had the secondary effect of causing firms otherwise eligible for funds to back away from the program. This is not to say that there are not numerous success stories associated with the first round. As many readers of this article can attest, even though the initial round was flawed, PPP was critical to many small businesses and kept the doors open in many of these firms. One study of small business professionals