Member Article

On April 2, 2020, the U.S. Department of the Treasury issued afinal borrower applicationand provided lenders with therequired datathe federal government will collect electronically to guarantee the loans.

The lender application form requires the lender to certify they have gathered the requisite information from the applicant, as outlined in the updated borrower application form.

The updated borrower application reflects several changes in information the applicant will be required to provide to lenders. We expect, however, that most banks will use individual online applications that incorporate the information required by the U.S. Small Business Administration. Applicants will not necessarily be required to submit form OMB Control No.: 3245-0407.

In addition to amending the Representations, Authorizations and Certifications to align with updated guidance on the program, changes to the borrower application form include:

In the Business Information Section:

• Adds more business entity options;
• Changes the Average Monthly Payroll equation to include an existing EIDL, less the $10,000 of advance (if applicable); and
• Changes “Number of Jobs” to “Number of Employees.”
  
  

In the Applicant Ownership Section:

• Changes requirement that Applicants list “all owners with greater than 20 percent ownership equity” to list “all owners of 20 percent or more of the equity.”
• Changes directions to Questions 5 and 6 –
  • Question 5: Requires the applicant to certify, on behalf of himself (if an individual) and on behalf of any individual owning 20 percent or more of the equity of the applicant, whether they are subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole.If yes, the application is denied.
  • Question 6: Requires the applicant to certify, on behalf of himself (if an individual) and on behalf ofallowners, whether in the last five years, they 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)?Previously, this certification was just required of 20 percent or greater owners for a record of the last seven years.If yes, the application is denied.
• Changes Question 7 – Previously if the applicant indicated in Question 7 he was not a U.S. citizen or lawful resident, the application would be denied. The new application amended this question to ask if the United States is the principal place of residence for all employees of the Applicant included in the Applicant’s payroll calculation. We are awaiting further guidance on affiliation rules that we hope will further clarify eligibility for the PPP.
• Adds Question 8 – Is the Applicant a franchise that is listed in the SBA’s Franchise Directory?
  
  

Please contact Alexis Schostak (248-203-0598), Tom Vaughn (313-568-6524), Mary Beth McGowan (202-906-8631, Government Policy Advisor) or your regular Dykema attorney with any questions. We are here to help you and your business navigate this difficult time.

Stay ahead of emerging issues with Dykema's COVID-19 Legal Resource Center and subscribe to all relevant publications so you can easily leverage information, stay up to date on evolving developments, and better position yourself for success.