Limitations Imposed on Paycheck Protection Program Loans for Related Entities
On April 30, 2020 the United States Treasury issued an interim final rule (SBA 2020-0023) pertaining to the Paycheck Protection Program (PPP) forgivable loans created by the CARES Act and administered by the Small Business Administration (SBA). The rule provides that the aggregate amount of PPP loans extended to a single corporate group shall not exceed $20 million.
The rule states that businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent. This is a different and simpler standard than the standards under the SBA affiliation rules. While SBA’s affiliation rules continue to apply to the determination of a borrower’s eligibility under PPP, the $20 million dollar limitation applies even if the businesses are eligible for the waiver of affiliation provision of the CARES Act or if they are not affiliated under the SBA affiliation rules.
It is the responsibility of the borrower or applicant of a PPP loan to notify the lender of any funds received or applied for in excess of the $20 million limitation and to withdraw or request cancellation of any pending PPP loan application that was approved violating the limitation.
The $20 million limitation is effective immediately with respect to any PPP loan that has not yet been fully disbursed as of April 30, 2020.
Borrowers or loan applicants who are part of complex ownership structures should review their relatedness on the common parent standard and make necessary adjustments to their loans.
The postings on this blog were created for general informational purposes only and do not constitute legal advice or a solicitation to provide legal services. Although we attempt to ensure that the postings are complete, accurate, and current as of the time of publication, we assume no responsibility for their completeness, accuracy, or timeliness. The information in this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel.
This blog may contain links to independent third party websites and services, including social media. We provide these links for your convenience, and you access them at your own risk. We have no control over and do not monitor the content or policies (including privacy policies) of these third-party websites and have no responsibility for, and no liability with respect to, their content, accuracy, or reliability. Unless expressly stated, we do not endorse any of the linked websites or any product, service, or publication referenced herein or therein. We will remove a link to any site from this blog upon request of the linked entity.
We grant permission to readers to link to this blog so long as this blog is not misrepresented. This site is not sponsored or associated with any other site unless so identified.
If you wish for Wilentz, Goldman & Spitzer, P.A., to consider representing you, please obtain contact information from the Contact Us area of this blog or go to the firm’s website at www.wilentz.com. One of our lawyers will be happy to discuss the possibility of representation with you. However, the authors of Wilentz blogs are licensed only in New Jersey and/or New York and do not wish to represent anyone who viewed this site in a state where the site fails to comply with all laws and ethical rules of that state.