The Small Business Administration (SBA) updated its Frequently Asked Questions (FAQ) on Paycheck Protection Program (PPP) Loans regarding the employee size standard*
On May 5, 2020, the SBA issued a new guideline for PPP applicants. It was published as Question #44 in the Paycheck Protection Program Loans Frequently Asked Questions (FAQs). Question #44 provides further guidance relating to how applicants determine eligibility with regard to the PPP’s 500 or fewer employee size standard. The SBA clarifies that an applicant must count all of its employees (including the employees of its U.S. and foreign affiliates) to determine whether it meets the 500 or fewer employee size standard.
Previously, as part of the Interim Final Rule 1 published on April 2, 2020, the SBA had stated that “You are eligible for a PPP loan if you have 500 or fewer employees whose principal place of residence is in the United States, or are a business that operates in a certain industry and meet the applicable SBA employee- based size standards for that industry…”. The new guidance states that “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.”
We are urging all of our clients to re-assess their eligibility for the program based on the updated guidance on the PPP’s 500 or fewer employee size standard. We recommend that you contact your legal counsel immediately should you have any questions or uncertainty.
If you determine that you are not eligible for the PPP, we encourage you to repay your loan as soon as possible. Your Bank Leumi representative will work with you to process your repayment. Please be reminded that any uncertainty regarding your eligibility for the PPP could impact your loan forgiveness.
If you have any questions about this alert, please contact your Bank Leumi representative. The full text of the SBA FAQ on PPP Loans can be accessed here. The SBA continues to update its guidance and publish clarifying interim final rules. Please monitor for such updates here.
Below is an excerpt (edited for formatting only) from the SBA FAQ on PPP Loans (updated 5/5/2020).
Excerpt from SBA FAQ on PPP Loans (updated 5/5/2020)
44. Question: How do SBA’s affiliation rules at 13 C.F.R. 121.301(f) apply with regard to counting the employees of foreign and U.S. affiliates?
Answer: 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. 13 C.F.R. 121.301(f)(6). Business concerns seeking to qualify as a “small business concern” under section 3 of the Small Business Act (15 U.S.C. 632) on the basis of the employee-based size standard must do the same.
*This communication is for informational purposes only and is not legal advice. Please contact your legal counsel for information related to how the SBA PPP impacts your business specifically.