New Information on Paycheck Protection Program (PPP) Loans

Below we’ve summarized recently released information related to the Paycheck Protection Program (PPP) Loans.

Businesses that are part of a “single corporate group” may receive only up to $20 million of PPP Loan funds in the aggregate. This limitation applies to any loan that was not fully disbursed as of April 30.
- Businesses are part of a “single corporate group” if they are majority owned, directly or indirectly, by a common parent.
This new limitation is in addition to the existing rules regarding eligibility for the PPP Loan, including the employee headcount limit and associated “affiliation” analysis.
This will likely have the largest impact on PE-backed companies and on large hotel and restaurant groups.

The FAQ from the Small Business Association (“SBA”) calls into question the proper analysis of foreign employees (i.e., employees with a primary residence outside the U.S.) for purposes of the employee headcount limit.
Previously, SBA regulations and guidance stated that “a business is eligible for a PPP loan if the business has 500 or fewer employees whose principal place of residence is in the United States.” See Question 3 of the FAQ and Section 2(a) of Interim Final Rule 1.
In the newly released Question 44 of the FAQ, the SBA states that “for purposes of the PPP’s 500 or fewer employee size standard, an applicant must count all of its employees and the employees of its U.S. and foreign affiliates, absent a waiver of or an exception to the affiliation rules” (emphasis added).
Since Question 44 of the FAQ was published on May 5, 2020, applicants who submitted their applications and received funds prior to that date should be able to rely on the previous guidance. However, all applicants should consider whether to take the more conservative approach of returning PPP funds before the end of the safe harbor (see below) if inclusion of foreign-based employees put them over the 500-employee limit.
We will continue to monitor this issue for additional updates and clarifications.

Previously, the SBA announced that recipients of PPP Loan funds who returned such funds by May 7 would be deemed to have the “necessity certification” (i.e., the certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”) in good faith.
- Read additional analysis regarding the “necessity certification.”
This “safe harbor” for returning PPP Loan funds has now been extended to May 14.