The Treasury Department recently released a revised PPP application on its website. With the exception of Bank of America, we’re not aware of other banks accepting applications today. It’s likely there will be a 2- or 3-day delay with other banks. We urge you to continue to prepare the necessary underlying documentation to facilitate the computations of the 2.5x monthly average payroll. This new application also removes troubling language related to companies that are more than 20% foreign-owned and/or are not permanent residents of the U.S. The recently released regulations may make the following non-immigrant categories eligible for SBA financial assistance
- B-1 Business Visitor
- F-1/OPT Optional Practical Training
- H-1B Specialty Occupation
- O-1A Extraordinary Ability and Achievement
- E-2 Treaty Investor; or
- L-1 Intracompany Transferee
In addition, businesses owned by Foreign Nationals or Foreign Entities may be eligible. The Lender and Development Company Loan Programs Guidelines issued April 1, 2020 states businesses listed in Appendix 1 are not eligible.
If you are an eligible business, there are additional requirements for businesses owned by non-citizens other than Legal Permanent Residents (LPRs), including foreign-owned businesses:
- The application must contain assurance that management is expected to continue in place indefinitely and have U.S. citizenship or verified LPR status.
- Management must have operated the business for at least 1 year prior to the application date. This requirement prevents financial assistance to “start-up” businesses owned by aliens who do not have LPR status.
Lender must require the personal guaranty from management
The Applicant must pledge collateral within the jurisdiction of the U.S. with a liquidation value equal to no less than the approved loan amount at the time of first disbursement and, to the extent that the value of collateral declines during the life of the loan, the Lender must require the Borrower to pledge additional collateral to ensure a sufficient collateral coverage amount. If the Applicant owned by foreign nationals, foreign entities or non-immigrant aliens residing in the U.S. does not have sufficient collateral, the Applicant IS NOT eligible for an SBA-guaranteed loan.
In order for a business not to be subject to these additional requirements, it must be at least 51% owned by individuals who are U.S. citizens and/or who have LPR Status from United States Citizenship and Immigration Services (USCIS) and control the management and daily operations of the business. This can only be waived by the Director of the Office of Financial Assistance (D/FA) or designee.
Development of the regulations is fluid and there may be additional modifications. It’s best to immediately contact your bank or banker for further clarification, but be prepared — they may not have all the answers as these guidelines were released late last evening April 2, 2020.
As always, if we can be of assistance please call (973) 301-2300 or contact us via email.