Another day, another change by the SBA/Treasury Department. They have just added two more questions to their FAQ’s: numbers 46 and 47. It would be awesome if they could actually provide the final regulations as mandated under the CARES Act, but not yet.

Anyway, the two additions are actually important. We have included the updated text here, but essentially the give back grace period has been extended to May 18th. More importantly, for those of you who received less than $2m, there is now a standard acceptance that you made the application and accepted the funds in good faith. You no longer have to be concerned that the government will accuse you of retaining the funds on the basis that they determine that you were not entitled to them.

For those of you who received greater than $2m, the audit mandate still applies. We advise you to take the time now, if you do not intend to return the funds, to document the reasons why you believe you are entitled to the proceeds. This may be purely based on your existing financial situation and a substantial decrease in revenue, but also can include future considerations based upon anticipated business over the coming months. An updated financial forecast can help document this. as well as other contemporaneous records. For example, the fact that various states are currently completely locked down without certainty of reopening is in fact potential evidence of your need for the funds.

Remember, (including those who received less than $2m), while the idea of forgiveness of the loan is extremely attractive, your current business situation may not make payment of payroll over the next 8 weeks after funding the most sensible idea. A 1% loan for 2 years with no payment required for six months is also pretty compelling.

A great number of folks have asked the same question. “I have been funded but I cannot open my business. Shouldn’t the 8 weeks begin after I can open my business?”

Absolutely it should. But right now that is not what the statute says. By the way any change of that period will require an act of Congress. The SBA cannot arbitrarily change it.

As we have said before: This is about survival! You have to judge the best way to use the funds that have been made available to you.

Stay strong and healthy

Your friends
Partners and staff of LHF