COVID-19 Client Resources and Updates
New Guidance Limits ‘Corporate Groups’ to $20 Million in Total PPP Loans
On April 30, 2020, the U.S. Small Business Administration (“SBA”) released an Interim Final Rule (the “IFR”) that, among other things, limits the amount of Paycheck Protection Program (“PPP”) loans that any single “corporate group” may receive to an aggregate of $20,000,000. The IFR applies to any PPP loans that have not been fully disbursed as of April 30, 2020.
The IFR is intended to preserve the limited resources available to the PPP program and to promote the availability of PPP loans to the greatest number of borrowers.
Pursuant to the IFR, businesses that are part of a single corporate group are not eligible to receive more than $20,000,000 of PPP loans in the aggregate. For purposes of this limit, businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent. The SBA’s affiliation rules, which relate to an applicant’s eligibility for PPP loans, and any waiver of those rules under the CARES Act, continue to apply independent of the $20,000,000 borrowing cap set forth in the IFR. Businesses are subject to this limitation even if the businesses are eligible for the waiver-of-affiliation provision under the CARES Act or are otherwise not considered to be affiliates under SBA’s affiliation rules. As noted above, the IFR is immediately effective with respect to any loan that has not yet been fully disbursed as of April 30, 2020. For loans that have been partially disbursed, the limitation applies to any additional disbursement that would cause the total PPP loans to a single corporate group to exceed $20 million.
Importantly, the onus is on the applicant for a PPP loan to notify its lender if it has applied for or received PPP loans in excess of the amount permitted by the IFR and withdraw or request cancellation of any pending PPP loan application or approved PPP loan not in compliance with the limitation set forth in this rule. Failure to provide such notification will be regarded as an unauthorized use of PPP funds, and the applicable PPP loan will not be eligible for forgiveness.
Although not explicitly stated, this guidance does not seem to require corporate groups who previously exceeded the $20 million threshold (but are not seeking additional funds) to return funds already received in excess of $20 million.
For a summary of the PPP generally, click here.
Please contact a member of Wiggin and Dana’s COVID-19 Team here if you have any questions regarding your PPP application or loan.
****
Visit Wiggin and Dana’s COVID-19 Resource Center here for additional publications and helpful links on multi-disciplinary topics that are relevant during the current COVID-19 global pandemic.
