Client Alerts, News Articles & Blog Posts

Everything you need to know about BMD and the industry.

PPP Update: Loan Necessity Questionnaires

On October 26, 2020, the Small Business Administration (“SBA”) published a notice in the Federal Register which foreshadowed the release of two new forms seeking information from for-profit and nonprofit organizations that received Paycheck Protection Program (“PPP”) loans of $2 million or more. If approved, the SBA would use information from these forms to evaluate and determine whether economic uncertainty made a PPP loan request necessary.

Originally, as part of the PPP application process, borrowers were required to certify that current economic uncertainty made its loan request necessary to support ongoing operations – a necessity certification. Then, with the release of FAQ 31, the SBA informed borrowers that a company – private or public – with substantial market value and access to capital markets will unlikely be able to make the required necessity certification in good faith. Accordingly, FAQ 31 provided that such company should be prepared to demonstrate, upon request, the basis for its certification. In response to this guidance, BMD urged its clients to begin documenting the specific circumstances that existed to substantiate the economic uncertainty or economic need at the time they applied. If you already went through this exercise, you will have a head start on answering the questions in the newly released forms.

The two forms – For-Profit Form 3509 and Nonprofit Form 3510 – purportedly have short timelines in which they must be completed and returned to lenders (10 business days from the receipt of the form/request) and the SBA (5 business days from receipt from borrowers). The forms require accurate disclosure of facts regarding business activity and liquidity, which bear on the necessity certification. Although these forms are still subject to comment until November 25th, it is important for borrowers with loans of $2 million or more to begin to think about the questions and possible answers.

Each form’s first section will inquire about the borrower’s business activities, including:

  • Sales in Q2 2020 vs. Q2 2019
  • Were the ordered shutdowns by a state or local authority after the National Emergency Declaration by President Trump (March 13, 2020)?
  • Were operations significantly altered due to state or local shutdown orders related to COVID? How? How much did these alterations cost? Were these voluntary?
  • Were operations voluntarily reduced or ceased? Why? How long?
  • Were any new capital improvements made between March 13, 2020 and the end of your covered period not due to COVID? Why? How much money?

Each form’s second section will inquire about the borrower’s liquidity, including:

  • What were your cash and cash equivalents on the last day of the calendar quarter immediately prior to the date of your PPP application?
  • Did you make any dividends or distributions (other than for tax purposes) between March 13, 2020 and the end of your covered period? How much?
  • Were any loans paid off before contractually obligated between March 13, 2020 and the end of your covered period? How much?
  • Were any employees or owners compensated in an amount that exceeds $250,000 on an annualized basis? If so, how many? What was the total compensation for those individuals during the covered period?
  • Were any other funds received from the CARES Act? If so, what program and how much?

While both For-Profit Form 3509 and Nonprofit Form 3510 follow the same format, the Nonprofit Form 3510 asks the following:

  • What type of endowments and other non-cash investments (i.e., equity, bond and real estate holdings) do you have?
  • Any restricted funds?

Regardless of the form, borrowers should heed the following advice when it comes to these forms: 1) be truthful; 2) ensure all responses are complete and accurate; and 3) start preparing answers to the above questions now, even before the comment period closes. It is also important to note that the contents of these forms may change between now and the end of the comment period; therefore, our SBA Team is ready, willing and able to help with this process.

For more information, contact your primary BMD Attorney.

Vaccination Considerations for Employers

Today, three Covid-19 vaccines have tested as highly effective (90%+ efficacy) and are advancing in the process for emergency use. This is especially welcome news in Ohio, which has skyrocketing cases and our strategic response has been to turn the entire state into the small town of Bomont with strict curfews and bans on social gatherings.

Did You Receive More than $750,000 in Provider Relief Funds?

The Provider Relief Funds (“PRF”) - authorized under the CARES Act - has been a vital tool for health care providers during the COVID-19 public health emergency. These funds have allowed providers to stay open and continue to offer care during these pressing times. While helpful, these funds do come with several important obligations. First, fund recipients are required to comply with certain record-keeping requirements as well as comply with certain balance billing prohibitions. See our Client Alert. Second, fund recipients are required to report their intent, use of funds, and other data elements, which helps promote transparency to the federal government. Please see our Client Alert on provider relief fund reporting requirements. Third, and perhaps a new concept for many providers, fund recipients of more than $750,000 must undergo a “single audit” to ensure program compliance and appropriate use of funds.

Important Updates Every Provider Should Know: Information Blocking

In December 2016, Congress passed the 21st Century Cures Act (“Cures Act”) which: (1) authorized funding for the National Institutes of Health to promote medical research and drug development, (2) implemented provisions aimed at addressing the prevention and treatment of mental illness and substance abuse, and (3) reformed certain standards of the Medicare program and federal tax laws to foster healthcare access and quality improvement.

Exposure to COVID-19 Flow Chart

Exposure to COVID-19 Flow Chart

Lessons Learned: Five Tips for Buying or Selling a Practice

If you are anticipating buying or selling a practice during the coming months, you are not alone. The healthcare industry is experiencing a wave of integration. In fact, it has been occurring for several years. Many transactional healthcare attorneys have negotiated and closed dozens of these transactions for clients. They have negotiated on behalf of the sellers in some cases and the buyers in others.