1)Okay, Treasury's new #Question31 is a kick in the TEETH!
"borrower that applied for a PPP loan prior to the issuance of this guidance & repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith."
home.treasury.gov/system/files/1
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2) Q31 started with "Do businesses owned by large companies with adequate sources of liquidity
to support the business’s ongoing operations qualify for a PPP loan?" SO YOU THOUGHT IT DIDNT APPLY TO YOU! IT DOES!!!
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3) keep reading, b/c it says: "Specifically, before submitting a PPP application, ALL BORROWERS should review carefully the required certification that"
"ALL" MEANS something specific...it means ALL... #startups #GrowthCompanies ALL!
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4) We've previously begged for more guidance on what the certification of need means & Treasury has now given us RETROACTIVE GUIDANCE. The Goal Posts Have MOVED after the game was played!
Replying to
5) "Borrowers must make this certification
in good faith, taking into account their current business activity and their ability to access
other sources of liquidity sufficient to support their ongoing operations in a manner that is
not significantly detrimental to the business."
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6) "NOT SIGNIFICANTLY DETRIMENTAL" - is that "MATERIAL ADVERSE"? That was never discussed!!
"LIQUIDITY SUFFICIENT" does that mean 4 months? 6 Months? 12 MONTHS of cash runway? &
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7) clearly " ability to access other sources of liquidity sufficient to support their ongoing operations" means "this ain't growth capital; it's rescue money"
But for that one, didn't most folks know that already? we've been surprised to see contrary advice given!
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8)THIS IS Misleading: "unlikely that a PUBLIC
COMPANY with substantial market value&access to capital markets will be able to make the required certification in good faith,&such a company should be prepared to
demonstrate to SBA,upon request,the basis for its certification"
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9) It's misleading b/c that line starts: "FOR EXAMPLE, it is unlikely that a public company..." Just "for example" - that does not mean "LIMITED TO PUBLIC COMPANIES"
So, a #startup with a comfortable cash cushion, low burn rate&access to...a term sheet w/o damage to business is
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10) kind of hosed here...right? So you have 14 days to REPAY IN FULL, but even then, "repays the loan in full by May 7, 2020 will be deemed by SBA to have made the
required certification in good faith"
but no insulation from private parties? other enforcement? #FOIA? So, is it
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11) worse to repay because it's an admission? Public companies will do 8K reporting, which is quite the roadmap. What about #Startups? How do you, as a #VC #BoardMember approach this? How do you revisit performance of #fiduciary obligations here? &
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12) these companies made plans based on having received the #PPPLoan. They're now literally going to be writing checks they can't cash! Have they rehired people they now may fire? Should you return some of the money (i.e., keep solely the forgivable portion)? Does that help?
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13) we definitely mapped a bunch of this out in what @_KathleenMcGee & I co-published in on #AttorneyGeneral Perspective on #PPPLoans, but there's more to come & work to do!
forbes.com/sites/edwardzi
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14) if you're wondering whether you're "of interest" to here, did you get > $1M? because, then you're top 4% of all loans...small pool to target
sba.gov/sites/default/
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17) today issued a new #InterimFinalRule. # 5 doubles down on FAQ31 & says gimme $ back. Also - Hedge/PE funds are out. Portfolio companies are a maybe but do NOT mess up AFFILIATION!!
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