LAS VEGAS—The deadline for small businesses to apply for the Paycheck Protection Program has been extended to Aug 8.
For adult entertainment companies, the issue of receiving approval for a PPP loan has been a sticky wicket — some have received loans, some have been flatly denied loans and some have filed lawsuits against the Small Business Administration for not enabling the loans.
The PPP is part of the CARES Act signed by President Trump and designed to help employers cover payroll, rent and other expenses during the COVID-19 outbreak.
The subsidies come as federal loans, but those loans can be forgiven if businesses use at least 60 percent of the funds for payroll.
The original deadline to apply for the PPP was this past Tuesday night. But $130 billion still remained in the fund, out of $660 billion allocated, and Trump gave approval of the extension on Saturday.
Federal courts have gone both ways on whether the SBA’s eligibility requirements for a PPP loan contradict the plain text of the CARES Act, which denies loans to businesses of a “prurient sexual nature."
In May, a federal judge blocked the SBA from denying federal coronavirus relief loans to multiple Wisconsin strip clubs based on their businesses’ sexual nature, ordering the government agency to start facilitating loans
That judge ultimately found that the clubs would have a likelihood of success proving the SBA regulation violates the First Amendment and the equal protection clause of the Fifth Amendment and considered the government’s arguments for excluding the clubs from relief due to the non-obscene sexual nature of their nude and semi-nude shows to be tenuous.
Just last month, another judge found just the opposite with a Buffalo strip club. That judge said the club was unlikely to prove that the SBA’s exclusion of adult entertainment businesses from the PPP violates its right to equal protection and freedom of speech.
Industry attorney Jeff Scott Olson, who was involved in the Wisconsin case, said that courts in both the 6th and 7th U.S. Circuit Courts of Appeals have held that the SBA regulations barring loans to prurient businesses are unlawful.
“Subsequent to those decisions, some adult businesses in those circuits have obtained loans,” Olson told AVN.
Olson successfully represented Madison, Wisc.’s Silk Exotic Gentleman's Clubs in pursuit of its share of PPP money.
“If the money is spent according to the terms of the program, the loans are presumptively fully forgivable,” the Madison, Wisc., attorney said. “In other words, it's free money.
Nicholas Watt, an industry attorney who represented The Vegas Gentlemen’s Club in the Wisconsin case, said that companies engaged in a business of “prurient sexual nature” likely will face challenges seeking loans.
“There are certainly legal hurdles to overcome for any business which the SBA and its approved lenders consider to be engaged in business of a ‘prurient sexual nature’” Watt told AVN. “This could range from adult filmmakers to brothels to gentlemen’s clubs to retail shops selling videos, magazines and toys.
“So, each business would need to weigh the costs and benefits based on their ability to operate and receive income during these difficult economic times versus the potential costs of legal action," the Madison lawyer said.
“[M]y client is only one of maybe a handful of adult entertainment businesses that received a PPP loan. So, overcoming these hurdles is absolutely possible.
“If adult entertainment companies feel they need a PPP loan to survive the economic impacts of COVID-19, then I would strongly suggest they speak to an attorney regarding their options.”
With the Aug. 8 extension, companies can submit applications through local banks or fintech companies, like Intuit, Square or PayPal.
Companies that eventually score PPP loans can also receive complete forgiveness using Form 3508EZ.
If companies aren’t approved for forgiveness, the program now allows borrowers five years to repay the loan at 1 percent interest. If a borrower received the loan prior to June 5, 2020, they must negotiate the five-year term with their lender.
