Paycheck Protection Program

Crowell & Moring LLP has been advising clients on the Paycheck Protection Program (“PPP”) since its inception as part of the CARES Act in March 2020. Our work has spanned the PPP spectrum, from determining eligibility, safe harbors, proper use, justifications, forgiveness, and tax implications to assisting clients with audits, investigations, and enforcement actions related to PPP loans. We offer a team of attorneys from across various practice groups—including Corporate, Government Contracts, Labor and Employment, Tax, White Collar Regulatory and Enforcement, False Claims Act, and Investigations—to ensure that clients are provided multi-disciplinary teams that efficiently and expertly address all concerns related to PPP loans and associated downstream risks. 

Our specific PPP experience includes:

  • Eligibility – Even before the initial PPP loan application period opened, Crowell advised companies on their eligibility to qualify for a PPP loan as (1) an entity that has 500 or fewer employees, (2) a business that meets the SBA employee-based or revenue-based size standard for its primary industry, and/or (3) SBA’s alternative size standard. As part of the size analysis, Crowell advised on affiliation and affiliation exemptions, drawing upon longstanding government contracts and SBA expertise. We also advised on other aspects of eligibility including applicable SBA 7(a) loan restrictions. 
  • Safe Harbor Regarding Loan Necessity –While the SBA’s guidance on loan necessity certifications was still evolving, Crowell was analyzing clients’ business activity and their access to other sources of liquidity to help them determine whether to keep their PPP loans or to utilize the safe harbor and return the loan proceeds.
  • Impacts on Acquisitions –Crowell recognized the risks involved in transactions where the target company has received a PPP loan and advised clients on restrictions in loan notes as well as SBA’s informational notice regarding change in ownership for entities that received PPP loans. Crowell’s advice extended to due diligence of PPP loans as well as negotiating allocation of risk and terms of purchase agreements specific to them.
  • PPP Loan Use – Crowell advised on loan use and documentation sufficient to demonstrate compliance with the applicable requirements. 
  • Tax Implications – Crowell’s Tax group counseled companies on the tax implications of PPP loans raised by Notice 2020-32 as well as the interaction of PPP loans and the employee retention payroll tax credit.
  • Loan Forgiveness – Crowell advised a number of companies with respect to their loan forgiveness calculations, the scope of payroll costs and other items eligible for forgiveness, assembling and reviewing relevant documentation, applications, and associated timelines. Crowell also provided advice to government contractors that received PPP loans on the risk of impermissible double recovery and how to handle.
  • Loan Necessity Justification – Crowell’s counseling has included advice on the SBA’s roll-out of a substantial information collection effort focused on the loan necessity certification made by borrowers with PPP loans of $2 million or greater. We also helped such companies prepare to respond to the SBA Forms 3509 and 3510 Questionnaires, and to prepare documentation in anticipation of audits and investigations.
  • Investigations and Prosecutions – Crowell’s bench of litigators, former prosecutors and regulators has represented individuals, public companies, private companies, and their management teams—both lender and borrower-side—on risks relating to PPP loans. We have also defended against PPP-related inquiries, subpoenas, and civil investigative demands from law enforcement, including the FBI, DOJ, and SBA IG, and involving allegations of criminal fraud, violations of the False Claims Act, antitrust concerns, and more. 

Crowell has provided extensive counseling to PPP borrowers on assessing levels of risk and mitigation efforts associated with receipt of PPP loans. As a result of that experience, combined with our deep government contracts, corporate, tax, labor and employment, white collar, false claims, and investigations teams, we are uniquely situated to provide both the counseling and litigation support needed for clients who are subject to PPP audits, investigations, and/or whistleblower actions. Finally, with the recent authorization of $806.5 billion for an extended period of the PPP with new or “second draw” loans available through March 31, 2021, our team stands ready to provide guidance and assistance on these key developments and anticipated benefits and challenges as well as insight on what to expect as companies continue to navigate the requirements of this lifeline loan program.

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