UPDATE: On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. The PPPFA extends the amount of time to spend PPP loan proceeds from 8 weeks to 24 weeks and relaxes the requirement that 75% of the loan be used for payroll expenses, lowering the threshold to 60%. Production companies applying for, or that have already obtained, a PPP loan can contact EP at covid19@ep.com to receive certain payroll documentation that may be requested by their SBA-approved lenders.

In our recently published Legal Alert entitled “How Entertainment Partners is Assisting SBA Paycheck Protection Program Loan Applicants – April 7, 2020,” we summarized certain loan programs made available to eligible small businesses through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The popularity of both the new Paycheck Protection Program (PPP) and expanded Emergency Injury Disaster Loan Program (EIDLP), and the resulting exhaustion of available funds within two weeks of availability, prompted Congress to craft and enact the Paycheck Protection Program and Health Care Enhancement (PPPHCE) Act to further assist impacted small businesses brave the financial impact of the novel coronavirus (COVID-19) pandemic.

Specifically, the PPPHCE Act unlocks another $321 billion under the PPP (with $60 billion earmarked for small, mid-size and community lenders, including minority lenders) and another $60 billion under the EIDLP (with $10 billion earmarked for advance grants).  Given how quickly the initial $349 billion earmarked for the PPP under the CARES Act was applied for and distributed, eligible and interested production companies should move quickly to apply for a PPP loan to avoid missing out on the benefits the PPP and EIDLP each provide to help assist small businesses in keeping their workers employed and in paying certain qualified expenses during the COVID-19 pandemic.

In step with Congress’s passage of the PPPHCE Act, the Small Business Administration (SBA) also released additional guidance regarding the PPP.  Of note, the SBA makes clear that any amounts made to an independent contractor or sole proprietor should be excluded from the applicant’s payroll costs, which would include payments made by production companies to certain loan-out companies (as independent contractors and sole proprietors may be eligible themselves to apply for PPP loans).  Also, in response to public backlash to certain public companies accessing PPP funds that were originally aimed to help struggling small businesses, the SBA opined that it would be unlikely that such companies with substantial market value and access to capital markets would be able to certify in good faith that a PPP loan would be necessary to support their ongoing operations.

Production companies applying for a PPP loan that relied on EP for employee payroll needs at any point in time during 2019 or 2020 should contact EP at covid19@ep.com to receive certain payroll documentation that will be requested by their SBA-approved lenders, including the required payroll documentation sufficient to support a determination of their monthly average payroll costs for purposes of the PPP loan application.


For any questions about this alert, you may contact:

Ed Pak, Lead Technology and Privacy Counsel

Becky Harshberger, Vice-President, Payroll Tax

Joseph Scudiero, Senior Vice-President & Chief Labor Counsel