SBA’s New Corporate Group Limitation and Additional PPP Loan GuidanceIn the last few days, the Small Business Administration (SBA) provided additional answers to frequently asked Paycheck Protection Program (PPP) questions and published yet another interim final rule on the administration of PPP loans. Applicants and borrowers should be aware of these updates to ensure compliance with the latest program requirements and avoid any non-compliance issues that may arise.

SBA Limits Eligibility Based on Corporate Groups

Under the latest interim final rule, businesses that are “majority owned, directly or indirectly, by a common parent” are considered a single corporate group and may not receive more than an aggregated amount of $20 million in PPP loans. This limitation is immediately effective for all loans that were not disbursed as of April 30, 2020.

Additionally, the onus falls on a PPP loan applicant to notify its lender if the group has applied for or received loans exceeding this limitation. If it has, the applicant must withdraw its application or request cancellation of a pending or approved application. If the applicant fails to do so, the loan will be ineligible for forgiveness.

The rule makes clear that SBA’s affiliation rules and any waiver of the affiliation requirements authorized by the CARES Act continue to apply independently of this corporate group limitation.  So, while a business may be eligible under the expanded criteria set forth in the CARES Act, it may be unable to obtain a loan if other entities within its corporate group have received PPP loans that encroach on this new limit.

SBA and Treasury Loan Review

Also, on April 29, SBA published additional answers to frequently asked questions about PPP loans. In Question 39, SBA explained that it and the Department of the Treasury will, following the lender’s submission of the borrower’s loan forgiveness application, review all PPP loans of more than $2 million, as well as any other loans as appropriate, to ensure that loans are limited to eligible borrowers in need. In doing so, SBA referred to its prior guidance in Question 31 about applicant liquidity and the importance for “all borrowers [to] review carefully the required certification that ‘[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”’ As a reminder, any borrower that applied for a loan prior to issuance of SBA’s April 23, 2020, answer to Question 31 of the frequently asked questions and repays the loan in full by May 7, 2020, “will be deemed by SBA to have made the required certification in good faith” and reportedly can avoid any liability.

SBA’s latest guidance and interim final rule not only reflects an effort to impose some limitation on loan eligibility in the present, it also indicates a forthcoming wave of compliance review. Borrowers should be prepared to respond and should take efforts to clearly document the business conditions that existed at the time a PPP loan certification was made.

If you have questions on these latest updates to the Paycheck Protection Program or how best to ensure compliance with the program’s requirements, please contact Aron Beezley, Elizabeth Boone, Frederic Smith or Alex Thrasher.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Aron C. Beezley Aron C. Beezley

Aron Beezley is the co-leader of Bradley’s Government Contracts Practice Group. Ranked nationally in Government Contracts Law by Chambers in 2019-2020, named one of the “Top Attorneys Under 40” nationwide in Government Contracts Law by Law360 in 2016-2017, and listed in Washington, D.C.

Aron Beezley is the co-leader of Bradley’s Government Contracts Practice Group. Ranked nationally in Government Contracts Law by Chambers in 2019-2020, named one of the “Top Attorneys Under 40” nationwide in Government Contracts Law by Law360 in 2016-2017, and listed in Washington, D.C. Super Lawyers as a “Rising Star” in Government Contracts Law in 2014-2020, Aron’s vast experience includes representation of government contractors in a variety of industries and in all aspects of the government-contracting process, including negotiation, award, performance and termination.

Photo of Elizabeth M. Boone Elizabeth M. Boone

Elizabeth Boone

Elizabeth advises clients on business transactions and compliance matters domestically and internationally, including contract negotiation, establishment and maintenance of legal entities, establishment of terms and conditions for the sale of goods, privacy compliance matters, employment matters and real estate transactions. She…

Elizabeth Boone

Elizabeth advises clients on business transactions and compliance matters domestically and internationally, including contract negotiation, establishment and maintenance of legal entities, establishment of terms and conditions for the sale of goods, privacy compliance matters, employment matters and real estate transactions. She regularly assists clients with ensuring compliance with GDPR, EU ePrivacy Directive (cookie law), CCPA, and other state-specific privacy laws.

Photo of Frederic L. Smith Jr. Frederic L. Smith Jr.

Frederic Smith has nearly 20 years of experience representing businesses in M&A transactions, contract negotiations, joint venture transactions and financing transactions. In addition to his transactional practice, Frederic serves as outside general counsel to several privately held and family-owned businesses. View articles by Frederic

Photo of Alexander G. Thrasher Alexander G. Thrasher

Alex Thrasher is an attorney in the Construction Practice Group who represents owners, general contractors and subcontractors across the country in complex commercial disputes. In addition, Alex advises clients on a range of other legal issues, including strategic business and project planning, contract…

Alex Thrasher is an attorney in the Construction Practice Group who represents owners, general contractors and subcontractors across the country in complex commercial disputes. In addition, Alex advises clients on a range of other legal issues, including strategic business and project planning, contract drafting, negotiation and administration, government contracting, and lien and bond claims. He also represents and advises clients in real estate transactions and other general commercial matters.