My PPP Loan is Approved – Should I Just Sign the Documents?
It has been almost three weeks since the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law. The CARES Act created, among other things, the Paycheck Protection Program (PPP) which provides for low interest loans for small businesses to cover certain payroll and operating costs. PPP loans may be forgiven, in whole or in part, if the funds are used for eligible costs during the covered period and jobs are retained and salaries are restored by June 30, 2020.
Eligible borrowers (and many of our clients) are receiving favorable lending decisions every day. Lenders are providing documents for electronic signature and depositing funds into borrower accounts at an unprecedented speed. While it can be tempting to “just sign the documents” and get the money in the bank, accepting the loan and the loan terms are significant business decisions that should be based on a complete understanding of the obligations in the loan documents and the ways to maximize forgiveness of the loan.
Our attorneys are familiar with the loan documentation being provided by national and local lenders. We encourage you to allow us to review your loan documents before you sign. We have already identified issues in drafts of loan documents received from various lenders, and we hope to have the opportunity to help you avoid problems by providing guidance on the issues identified below. There could be an opportunity to:
- correct mistakes in business terms to make sure you get your loan on the approved terms;
- clarify the accuracy of representations to avoid a misrepresentation that could result in a fraud upon the bank; or
- improve some of the operating covenants applicable during the term of the loan so that the lender does not have the ability to affect the day to day decisions relating to your business, such as employment or compensation decisions.
If you have already signed your documents, we encourage you to provide the documents to us so we can confirm that you understand your obligations in order to avoid a costly default, and can advise you on strategies to maximize your forgiveness of the loan.
More information on the CARES Act and the PPP can be found in our firm’s COVID-19 Resource Center by clicking here