Many law firms that applied for paycheck protection loans are still waiting; Texas lawyer sues
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Many smaller law firms applied for loans under the federal Paycheck Protection Program, and many are still waiting.
Ninety percent of 75 surveyed managing partners at small and midsized firms said they had applied for a forgivable loan under the program, according to an April 15 poll by the Remsen Group, a consulting firm. About half had been approved, and the others were still awaiting word on their applications, according to Law360.
The Daily Report contacted 10 smaller law firms in Atlanta and learned that only one had been funded, according to an April 24 article. The others missed the cutoff date or were still waiting on funds.
The program ran out of money by April 16, but Congress has added funds. The aim is to keep employees on payrolls of small businesses during the COVID-19 pandemic.
One lawyer was so frustrated by delays that he filed would-be class action lawsuits against three banks on behalf of himself and other clients, according to the Texas Lawyer.
The Houston lawyer, Alfonso Kennard Jr., told the Texas Lawyer that he applied for $160,000 on April 3, the first day of the program, then heard nothing until April 16. He was told that his loan had been processed, but no other information was available.
One of Kennard’s class actions alleged that the defendant bank prioritized select customers and bigger businesses, the San Antonio Express-News reports. The suit seeks triple damages under the state’s deceptive trade practices law. Banks are facing similar lawsuits in other states, according to the article.
Any business with 500 or fewer employees can apply for loans under the program, which provides loans for up to two months of average payroll costs, plus an additional 25% of that amount.
Workers who are contractors aren’t considered employees in the loan calculation, according to Ian Berkowitz, a former attorney adviser with the Small Business Administration who spoke with Law360. Associates and partners receiving a K-1 tax form are considered employees, but only the first $100,000 of pay is considered in the loan calculation.
The loan is forgiven if the money is used for payroll, rent, mortgage interest and utilities over an eight-week period after the loan is made. At least 75% of the amount must have been used for payroll. Employees must remain on the payroll for full forgiveness, and their pay can’t be cut by more than 25% if they make less than $100,000.