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Food Venture Financing News - Weekly Issue No. 10

05.27.20
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In This Issue:

Pending PPP Modification Legislation

The Senate could vote as early as this week on a bill that would double the loan forgiveness period to 16 weeks. The House is expected to vote this week on standalone legislation that would extend the loan forgiveness period to as long as 24 weeks and also eliminate the rule requiring PPP borrowers to spend at least 75% of the funds on payroll costs to qualify for full loan forgiveness. A separate Senate bill would also expand the loan forgiveness period to 24 weeks and eliminate the 75% rule.

Two New Interim PPP Rules Issued by Treasury Department and SBA

The two new interim final rules released Friday address loan forgiveness requirements and PPP loan review procedures and related borrower and lender responsibilities.

Highlights of the new PPP loan forgiveness requirements guidance include the following:

  • Establishment of an alternative method for determining when the eight-week period starts for businesses with pay cycles of biweekly or more frequent.
  • Clarification that bonuses and hazard pay are eligible for loan forgiveness, as are salary, wages, and commission payments to furloughed employees. The payments cannot exceed the pro-rated amount of a $100,000 annual salary.
  • Establishment of caps on the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation.
  • Clarification on when non-payroll costs must be incurred or be paid to qualify for loan forgiveness.
  • Reiteration of the previously announced guidance setting the rules for when employers can exclude from loan forgiveness calculations employees who refuse to be rehired.
  • Clarification that borrowers may appeal SBA determinations within 30 days of receipt. The guidance also says an appeal process will be established, with the specifics coming in a later interim final rule.
  • Requirement that lenders to decide on loan forgiveness within 60 days of receipt of the complete application from the borrower. The SBA then has 90 days to review the loan forgiveness application.
  • Clarification that borrowers may be asked questions by lenders and the SBA.

Credit Markets Update

Senior lenders continue to favor existing portfolio companies and focus their efforts on loan modifications and restructurings for their existing companies.
While senior lenders are open to establishing new relationships, there will be heavier scrutiny in the due diligence process and the timeline to lend will be longer.
Cash flow leverage limits for junior lenders have gone down to 1-2x EBITDA.

  • Ecommerce continues to accelerate as a platform to purchase groceries as states begin to reopen.
  • Consumer and investor interest in plant-based food products continue to rise as meat prices increase due to health issues at meat processing plants. Impossible Foods and Beyond Meat have been focusing on reducing costs to take advantage of the interest in plant-based food products.

At Davis Wright Tremaine LLP (DWT), we are proud to have one of the largest Food & Beverage legal practices in the country, with over 40 attorneys representing food innovators, entrepreneurs, and investors at every level of the food chain, from Farm to Label.

Please contact our Food and Beverage team if we can assist you in any way in these unprecedented times.


The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.

DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.

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