Home care providers with PPP loans can’t bank on forgiveness
Small Business Administration (SBA) Paycheck Protection Program (PPP) loans have been a boon to many home care agencies in 2020, keeping their heads above water during downturns financial and rewarding employees for performing hazardous work.
But now agencies need to prepare for the consequences of PPP in the form of loan forgiveness requests, financial audits, and billing reviews.
“Really, the question you are going to have to ask yourself is: are you ready?” Jamie Whatley, partner at Dorsey & Whitney LLP, said during a recent webinar. “Are you ready if there is an SBA exam, or adverse decisions from SBA invoices or audits, [for example]? “
Dorsey & Whitney LLP, based in Minneapolis, is a law firm that works with clients in the healthcare industry, as well as clients in five other industries.
The vast majority of PPP loans were sent in two cycles: one included in the CARES (Coronavirus Aid, Relief and Economic Security) law at the end of March 2020, and another in December under the law of 2021 consolidated credits.
Home care agencies have been the main benefactors of these funds, receiving loans ranging from tens of thousands to loans in the millions of dollars. One of the biggest stipulations of the loan program was that no less than 60% of the funds received had to be spent on salary costs, which is why many agencies used the money to reward their employees with a risk premium.
Last week, PPP funds were exhausted, according to the SBA.
Debt cancellation was supposed to be part of the program, but it’s not automatic, Ken Logsdon, partner at Dorsey & Whitney, told the webinar. Loans over $ 2 million were also subjected to much higher review criteria as part of the forgiveness process, including automatic verification.
An agency that has received a loan must request cancellation of its debt through an app. The lender then has 60 days to review it and send it to the SBA. Once this happens, the ASB has an additional 90 days to review the request and make a pardon decision.
But that 90-day limit for the SBA is not being met at this time in many cases, causing providers to worry. In addition, the bar for the amount that lenders should review has not been firmly set, which is confusing.
“There are a lot of apps that go beyond the 90 day period,” Logsdon said. “This raises many question marks as to what [going on]. And frankly, we don’t really know. Because due to the volume of incoming applications and the size of the program, the SBA is overwhelmed. And so it is very difficult for him to adhere to this standard. “
The SBA foresaw these types of bandwidth issues. This is part of the reason why he decided to reduce the supervision of loans under $ 2 million and rely on “good faith”.
But just because the SBA has chosen to gloss over some issues with loans under $ 2 million does not mean that other government agencies will follow suit, Logsdon said.
“The SBA – more or less – gives loans of less than $ 2 million in the first round of a free pass,” Logsdon said. “They didn’t say other government agencies wouldn’t take a closer look. It is always a [possibility]. “
Potential forgiveness issues
When a final decision on loan cancellation is made, it will come either from the ASB directly or, in some cases, from the lender. If the result of the review is not satisfactory for the agency, it will be because the SBA found that the company was not eligible for the loan from the start; he was not eligible for the amount of money provided to him; or that the funds received have not been properly allocated.
At this point, an agency can comply with the decision and work out reimbursement details with the SBA or appeal the decision to the SBA’s Office of Hearings and Appeals (OHA).
Either way, every agency should be prepared for this possibility, Douglas Lang, lawyer at Dorsey & Whitney LLP, said during the webinar.
“It is essential that anyone who believes there is a ghost of luck that some of the debt – or all of it – will not be forgiven – get ready,” Lang said. “They really need everything [in a line] to continue this call.
In these cases, the appellant – the agency, in this case – bears the burden of proof. The final decision on the appeal would be determined on whether “the SBA loan review decision was based on manifest error or on the face of the law.”
The content required for an appeal includes a copy of the SBA loan review and a complete and specific statement that is complete enough to explain exactly why the appeal is being filed. In addition, it must include the remedy requested from the appellant and the contact details of the agency or his lawyer as well as the signatures.
An agency will have to file a petition, then wait 45 days for the SBA to consider its appeal, then wait another 45 days – at least – for the official second review findings.
If an agency of the first tranche of PPP borrowers upfront admits wrongdoing, whether accidental or intentional, and repays the amount owed, the SBA will provide safe haven. For the second installment, as long as a business can prove a 25% reduction in its gross revenue, this also serves as a safe haven for it.