Confusing Paycheque Protection Loan Application
February 18, 2021
Two days after Christmas, then president Donald trump reluctantly signed a stimulus bill that thrilled residents of housing cooperatives at national scale. After a vigorous lobbying campaign on the part of New York defenders, including the US senator. Chuck schumer, the bill made residential co-ops eligible for $ 284 billion in forgivable loans under the Paycheque Protection Program. It was a major breakthrough.
Now with the Small business management (SBA) approaching its March 31 application deadline, some co-op boards balk because the application form sets out strict conditions – and stiff penalties, including fines and prison time, for candidates who do not meet these conditions.
“I have a number of co-op clients who are eligible for the loan but will not apply,” says Dan Wollman, managing director of the management company Gumley Haft. “The chairmen of the boards say they will not sign on behalf of all the shareholders. Some of our clients went ahead and applied, but if I was a co-op president, I wouldn’t sign it.
Wollman’s distrust comes from four questions on the application form – and the penalties in the event of an exact non-response. The form states that any applicant who answers yes to any of the questions will be disqualified from receiving a loan. With my apologies to the English grammar students, here are the questions, textual, as they appear on the application form:
- “Is the applicant or any owner of the applicant currently suspended, struck off, proposed for delisting, declared ineligible, voluntarily excluded from participation in this transaction by any federal department or agency, or currently involved in any bankruptcy? “
- “Has the applicant, any owner of the applicant or any business owned or controlled by any of them ever obtained a secured loan of the SBA or any other federal agency that is (a) presently offender, or (b) a in default over the past seven years and caused a loss for the government? “
- “The applicant (if it is an individual) or an individual 20% or more of equity of the applicant currently incarcerated or, for any crime, which is currently the subject of an indictment, criminal investigation, indictment or other means by which criminal charges are brought to any jurisdiction? ”
- “In the past five years, for any crime involving fraud, bribery, embezzlement or misrepresentation in a loan application or federal financial aid application, or in the last year, for any other crime, the applicant (if an individual) or any owner of the applicant 1.) been convicted; 2.) pleaded guilty; 3.) pleaded nolo pretendere; or 4.) started any form of parole or probation (including pretrial probation)? “
The form also requires applicants to agree to the following: “I understand that knowingly making a false statement to obtain a secured loan from the SBA is punishable under the law … with a maximum jail term of five years and / or a fine of up to $ 250,000. “
Wollman assumes that the reference in the third question to “any individual with 20% or more of the equity” refers to a sponsor of a cooperative. There is confusion if the other three questions apply only to limited partners or to all shareholders of the corporation.
“We don’t know whether they are or not,” says Wollman. “I think this is a lost opportunity for the people who rightly qualify. Too bad.”
Jay hack, partner of the law firm Gallet Dreyer & Berkey, agrees that there is confusion whether the 20% ownership rule applies only to the criminal history question or to all questions on the application. Nevertheless, he urges his cooperative clients to legitimate needs apply for forgivable loans – while taking precautions. “I can understand a company manager refusing to sign the application form, ”he said. “The management agent must sign the application with board approval, because the agent keeps the financial records. Hack advises its clients to apply for the loans for one simple reason: “It’s free money.