Government just released notification with no clear guidelines that companies who took money but didn't need it (language is heavily biased against VC-backed startups) will need to repay by May 6th for forgiveness, or be investigated and potentially fined/penalized for taking money they didn't need.
This is a good idea in theory but of course the language is hopelessly vague and there are no guidelines, because that would mean we could hold the government accountable. What does "take money you didn't need" mean? My business (non-VC backed, just an SMB) took PPP funds so we could continue to employ our workstaff (the intent of the program), but we were not facing immediate bankruptcy. Is that OK?
Classic regulatory frameworks that don't define anything.
Entity type: Pretty much any "business" entity is eligible.
Size: The SBA has very clear size standards (based on employees or if you look at alternative size standards a combination of net assets and historical profitability). These are all objective criteria.
Affiliation: The Treasury & SBA intentionally loosened affiliation rules to INCLUDE the vast majority of VC-backed companies.
Credit elsewhere, collateral, personal guarantees: The Congress eliminated these requirements because they would limit and slow capital access.
The Treasury issued new guidance on Thursday in response to a loophole that allowed large companies (aka those that would not qualify themselves) to access PPP funding through their subsidiaries (which previously DID qualify under the law). This guidance is very clear: it applies to "large companies" (aka not "small businesses") and effectively closes the loophole. As a result many companies have returned their PPP loans, which was the intended result. (Q31 here https://home.treasury.gov/system/files/136/Paycheck-Protecti...)
Not a lawyer but "need this money" seems reasonable to interpret as "you could not pay your employees if you didn't get this money". Which suggests VC-backed startups probably shouldn't have taken it and should return it.
My company technically could have paid our employees if we didn't take the money, but we'd have to cancel 90% of our R&D projects, slash operations, etc etc. So that still doesn't really mean anything, unless the intent was "if you literally could not make payroll after liquidating equipment / canceling all operational expenses," which I hope was not the case.
This is a good idea in theory but of course the language is hopelessly vague and there are no guidelines, because that would mean we could hold the government accountable. What does "take money you didn't need" mean? My business (non-VC backed, just an SMB) took PPP funds so we could continue to employ our workstaff (the intent of the program), but we were not facing immediate bankruptcy. Is that OK?
Classic regulatory frameworks that don't define anything.