Congress Creates Key to PPP DIP Loans, Hands Key to SBA
The CAA appropriates $284.45 billion to reopen the PPP program and provide a second round of loans to existing borrowers. The Small Business Administration (SBA) previously promulgated regulations disqualifying debtors in bankruptcy from the program. These regulations were challenged in bankruptcy and appellate courts across the country with mixed results that created widespread uncertainty about debtors’ qualification for PPP loans. The CAA resolved that uncertainty by substituting it with a new form of uncertainty. The CAA amends § 364 and other sections of the Bankruptcy Code to allow debtors in possession (and trustees) in chapters 12 and 13 and subchapter V of chapter 11 to obtain PPP funds if they are otherwise eligible — but the amendments will go into effect only if the SBA reverses its position that debtors in possession or trustees can be eligible for PPP loans.

The COVID-19 pandemic has devastated a large number of small businesses around the country. Many of these “mom and pop” businesses have been operating locally for generations. But now, small businesses, particularly within the retail and service industries, are in an untenable position. Their revenues have dramatically decreased due to stay-at-home orders, capacity restrictions and customers affected by COVID‑19.