SBA Extends PPP “Safe Harbor” to May 18The Small Business Administration (SBA) issued a second update to its answers to frequently asked questions about the Paycheck Protection Program (PPP) on May 13, 2020. This update extends the “safe harbor” period for businesses to return funds received under the PPP and be deemed by the SBA to have submitted their prior certification of necessity in good faith.

Question: An SBA interim final rule posted on May 8, 2020 provided that any borrower who applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification concerning the necessity of the loan request in good faith. Is it possible for a borrower to obtain an extension of the May 14, 2020 repayment date?

Answer: Yes, SBA is extending the repayment date for this safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider FAQ #46. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor.

As we noted in a previous article, the SBA also updated its answers to frequently asked questions earlier in the day on May 13, 2020, to reflect new guidance concerning the so-called “economic uncertainty” certification.

Bradley will continue to monitor and report on the SBA’s evolving PPP guidance. If you have any questions about the PPP or related issues, please feel free to contact Aron Beezley, Frederic Smith, or Elizabeth Boone.

In Georgia, Rely on an Affiliate’s or Individual’s General Contractor’s License at Your Own PerilOn May 5, 2020, the Georgia Court of Appeals affirmed a trial court summary judgment ruling dismissing a residential contractor’s claims against an owner because the contractor was not properly licensed. In LFR Investments, LLC v. Van Sant, after being terminated by the property owner, a homebuilder brought claims for breach of contract and unjust enrichment against the owner. The owner moved for summary judgment on those claims arguing that the builder lacked the ability to enforce the contract because it was not licensed to build homes.

Under Georgia law, an unlicensed general contractor cannot enforce the terms of a contract in law or equity. To be properly licensed, Georgia law permits a business organization to rely on the license of a “qualifying agent” holding a valid residential contractor or general contractor license. The qualifying agent must apply, and be approved, for a license expressly on behalf of the business in order for the business to rely upon that license.

In this case, the contractor was registered as an LLC with a sole member. That sole member was licensed and registered as a qualifying agent for a separate entity but not for the LLC that contracted with the property owner. The LLC attempted to impute its sole member’s license onto the LLC in rebutting the property owner’s summary judgment motion. The appellate court disagreed, holding that the contractor’s interpretation would nullify the express requirements of the licensing statute that a qualifying agent apply for and hold a license directly on behalf of a business.

Contractors often operate using multiple affiliated entities to prosecute different types of work. The Georgia court’s decision is a reminder for such contractors to check their compliance with applicable licensing regulations. If your company is improperly relying, for example, on an affiliate’s license or the license of an individual who is not registered as a qualifying agent in a state like Georgia, that may prove disastrous to recovery on otherwise meritorious claims.  Additionally, some licensing statutes may provide for criminal penalties for operating without a license, which is yet another reason to confirm compliance. Note also that there may be delays to processing new license applications during the ongoing pandemic, and you should account for this potential when planning your work. If you have questions about licensing requirements in Georgia or other states, please do not hesitate to contact Aman Kahlon or Monica Dozier.

SBA Issues Long-Awaited Rule on Women-Owned Small Business CertificationThe Small Business Administration (SBA) recently published its long-awaited final rule implementing a 2015 statutory requirement to certify Women-Owned Small Business Concerns (WOSBs) and Economically Disadvantaged Women-Owned Small Business Concerns (EDWOSBs) participating in the Procurement Program for Women-Owned Small Business Concerns. Notably, the SBA’s final rule also adjusts the dollar threshold for determining whether an individual qualifies as economically disadvantaged. Key takeaways from the SBA’s final rule — which becomes effective on July 15, 2020, but with many of the specific changes going into effect on October 15, 2020 — are set forth below.

Women-Owned Small Business Certification Program

  • The 2015 National Defense Authorization Act amended the Small Business Act to require that concerns participating in the Procurement Program must be certified by the SBA, a federal agency, a state government, or an approved national certifying entity. In response, the SBA proposed eliminating the references in 13 C.F.R. § 127 to self-certification for the award of WOSB/EDWOSB contracts.
  • The certification requirement applies only to participants wishing to compete for set-aside or sole source contracts under the Procurement Program.
  • Once this rule is effective, WOSBs and EDWOSBs that are not certified will not be eligible for contracts under the program.
  • Other woman-owned small business concerns that do not participate in the Procurement Program may continue to self-certify their status, receive contract awards outside of the program, and count towards an agency’s goal for awards to WOSBs.
  • The final rule revises 13 C.F.R. § 127.300 to establish the following options for small business concerns seeking certification as a WOSB or EDWOSB: (1) applying via the SBA’s free online application, (2) submitting evidence of certification from another approved government entity, or (3) submitting evidence of certification from an approved third-party certifier.
  • Under the new regulations, all concerns, whether certified directly by the SBA or otherwise, will be required to attest to the SBA annually that they remain eligible for the Procurement Program and undergo a full program examination every three years.
  • A concern must be certified as a WOSB or EDWOSB to be awarded a WOSB or EDWOSB set-aside or sole-source contract. However, a concern that was previously awarded a WOSB or EDWOSB contract may continue to perform that contract, and the procuring agency may continue to count the contract towards its WOSB goal.
  • Once this rule is effective, however, a concern performing on a long-term WOSB or EDWOSB contract (i.e., a contract in excess of five years) must represent that it is a certified WOSB or EDWOSB for the award to continue to count towards an agency’s WOSB goal.
  • For new WOSB and EDWOSB set-aside contracts, a concern must be able to demonstrate that it has applied for certification before the date it submitted a bid, and that it has not previously sought and been denied certification.
  • For new WOSB or EDWOSB sole-source contracts, a concern must already be certified at the time it seeks to obtain the sole-source contract.
  • Concerns that are owned and controlled by one or more women and certified through the SBA’s 8(a) Business Development Program, concerns that are third-party certified, and concerns that were subject to a program examination or status protest and “received a concomitant positive decision in the three years prior to the rule’s effective date will all be considered certified the date the rule is effective.”

Economic Disadvantage Thresholds

  • Currently, the economic disadvantage criteria for EDWOSBs is $750,000, which is the same as the continuing eligibility threshold for the SBA’s 8(a) Business Development Program, but higher than the $250,000 initial eligibility threshold for the 8(a) Business Development Program. Thus, a concern applying for EDWOSB and 8(a) Business Development status simultaneously could be economically disadvantaged for EDWOSB purposes, but not for the 8(a) Business Development Program. To remedy this inconsistency, the SBA’s final rule makes economic disadvantage consistent across programs by keeping the EDWOSB economic disadvantage threshold of $750,000 and adjusting the 8(a) BD economic disadvantaged initial eligibility threshold up to $750,000.

Bradley will continue to monitor and report on this noteworthy development. If you have any questions about the SBA’s final rule or any related issues, please feel free to contact Aron Beezley or Sarah Osborne.