Since being issued in April, FAQs regarding the Paycheck Protection Program (PPP) have been updated by the Small Business Administration (SBA), in consultation with the Department of the Treasury, as additional clarification has become available. The responses are the SBA’s interpretation of the CARES Act and PPP Interim Final Rules.
The following are highlights of the most recent updates to the FAQs that apply to borrowers of the PPP:
- FAQ #22 addresses how the $10 million cap on PPP loans and the affiliation rules work for franchises. Each franchisee of brands listed on the SBA Franchise Directory can apply for a PPP loan if it meets the size standard. The franchisor does not apply on behalf of its franchisees. The $10 million cap is per franchisee entity, and each franchisee is limited to one PPP loan. Brands that have previously been denied listing on the SBA Franchise Directory due to affiliation between franchisor and franchisee may reapply for the purposes of applying for PPP loans. Affiliation rules won’t be applied, but the SBA will ensure the brand is otherwise eligible to be listed.
- FAQ #34 confirms that agricultural producers, farmers, and ranchers are eligible for PPP loans if they have 500 or less employees, fit within the revenue-based sized standard of average annual receipts of $1 million, or meet the SBA’s “alternative size standard.” Refer to the FAQs for definition of “alternative size standard.” Applicant must include affiliates in calculations.
- FAQ #38 addresses the eligibility for PPP loans for businesses in operation on February 15, 2020 that changed ownership thereafter. As long as the business was in operation on February 15, 2020 and all other eligibility criteria is met, the new owner of the acquired business may apply for a PPP loan. In addition, as of May 6, 2020, the purchaser of assets is eligible to apply for a PPP loan even if a new tax ID number was issued, and the acquiring business was not in operation until after February 15, 2020.
- FAQ #40 states that the SBA and Treasury Department will issue an interim final rule that excludes laid off employees that refuse a borrower’s offer for rehire from the CARES Act loan forgiveness reduction calculation. To qualify, the borrower must demonstrate that it has made a good faith, written offer to rehire the employee at the same salary/wages and number of hours. In addition, the borrower must also document the employee’s rejection to the rehire offer.
- FAQ #41 confirms that the interim final rule issued by the Treasury department on April 27, 2020 allows seasonal borrowers to use an alternative base period for purposes of calculating the loan amount for which they are eligible under the PPP.
- FAQ #43 states the safe harbor deadline has been extended to May 14, 2020. Borrowers that applied for a PPP loan prior to April 24, 2020 and repay the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification in good faith. This extension is automatic and will be implemented through a revision to the SBA’s interim final rule providing the safe harbor. The SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.
- FAQ #45 states that any employer that applied for a PPP loan, received payment, and repays the loan by the May 14, 2020 safe harbor deadline will be eligible for the Employee Retention Credit.
Price Kong can help you navigate the complexities of the PPP. Contact us at 602.776.6300 or visit pricekong.com for more information.