PPP Loan Insurance: An Introduction and Overview

Many small businesses sought and received funds pursuant to the CARES Act, under the Paycheck Protection Program (PPP) administered by Small Business Administration (SBA), at the outset of the COVID-19 pandemic. The SBA provided these funds in the form of loans, but also provided a roadmap for eligible applicants to obtain loan forgiveness — including guidelines pursuant to which all or portions of the loans can be transformed into grants. In order to qualify for the program, applicant businesses were required to make a number of certifications regarding compliance with a relatively complex set of eligibility criteria, including certifications as to the necessity of receiving PPP funds and the size of their business. Now, as the dust begins to settle, businesses that received PPP funds face the risk of an SBA challenge to their eligibility to retain the PPP funds without a repayment obligation. In this article, partner Howard Epstein and special counsel Theodore Keyes discuss the introduction of PPP Insurance, which is designed to insure certain risks associated with SBA challenges to borrowers’ eligibility to retain PPP funds.