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PPP Update: Loan Necessity Questionnaires

Client Alert

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.


The Ohio State University Launches Its Accelerated Bachelor of Science in Nursing Program

In response to Ohio’s nursing shortage, The Ohio State University College of Nursing is accepting applications for its new Accelerated Bachelor of Science in Nursing program (aBSN). Created for students with a bachelor’s degree in non-nursing fields, the aBSN allows such students to obtain their nursing degree within 18 months. All aBSN students will participate in high-quality coursework and gain valuable clinical experience. Upon completion of the program, graduates will be eligible to take the State Board, National Council of Licensure Exam for Registered Nursing (NCLEX-RN).

Another Transparency Obligation: The FinCEN Beneficial Ownership Information Reporting Requirements

Many physician practices and healthcare businesses are facing a new set of federal transparency requirements that require action now. The U.S. Department of Treasury Financial Crimes Enforcement Network (“FinCEN”) Beneficial Ownership Information Reporting Requirements (the “Rule”), which was promulgated pursuant to the 2021 bipartisan Corporate Transparency Act, is intended to help curb illegal finance and other impermissible activity in the United States.

“In for a Penny, in for a Pound” is No Longer the Case for Florida Lawyers

On April 1, 2024, newly adopted Rule 1.041 to the Florida Rules of Civil Procedures goes into effect which creates a procedure for an attorney to appear in a limited manner in civil proceedings.  Currently, when a Florida attorney appears in a civil proceeding, he or she is reasonable for handling all aspects of the case for their client.  This new rule authorizes an attorney to file a notice limiting the attorney’s appearance to particular proceedings or specified matters prior to any appearance before the court.  For example, an attorney can now appear for the limited purpose of filing and arguing a motion to dismiss.  Once the motion to dismiss is heard by the court, the attorney may file a notice of termination of limited appearance and will have no further obligations in the case.

Enhancing Privacy Protections for Substance Use Disorder Patient Records

On February 8, 2024, the U.S. Department of Health and Human Services (“HHS”) finalized updated rules to 42 CFR Part 2 (“Part 2”) for the protection of Substance Use Disorder (“SUD”) patient records. The updated rules reflect the requirement that the Part 2 rules be more closely aligned with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) privacy, breach notification, and enforcement rules as mandated by the Coronavirus Aid, Relief, and Economic Security Act of 2020.

Columbus, Ohio Ordinance Prohibits Employers from Inquiries into an Applicant’s Salary History

Effective March 1, 2024, Columbus employers are prohibited from inquiring into an applicant’s salary history. Specifically, the ordinance provides that it is an unlawful discriminatory practice to: