Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Small Business Administration (SBA) is tasked with administering the Paycheck Protection Program (PPP), the loan program intended to allow employers to continue to pay their employees and assist with certain other expenses resulting from the COVID-19 pandemic.
As the PPP went into immediate effect without the standard comment period, the SBA continues to issue additional guidance in the form of Frequently Asked Questions (FAQs) and responses. The most recently updated FAQs, current as of May 6, 2020, are available here. Importantly, the government will not challenge actions that borrowers and lenders take consistent with the guidance in effect at the time.
In the most recently updated FAQs, the SBA provided the following guidance:
1. Extension of Repayment of a PPP Loan for Compliance with a Good Faith Certification
The SBA is extending the repayment date for an applicant to avail itself of the safe harbor provision for compliance with the requirement that it certify in good faith that the loan proceeds are necessary to support the applicant’s ongoing business operations from May 7, 2020 to May 14, 2020. Borrowers do not need to apply for this extension. The SBA stated that it intends to provide additional guidance on how it will review the certification prior to May 14, 2020.
2. Calculation of Employees – Foreign Affiliates
The SBA clarified that for purposes of the PPP’s 500 or fewer employee-based 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. Additionally, business concerns seeking to qualify as a “small business concern” under section 3 of the Small Business Act on the basis of the employee-based size standard must do the same.
3. Eligibility for the Employee Retention Credit for Businesses that Return PPP Loan Funds
The SBA provided guidance that an employer that applied for a PPP loan, received payment and repays the loan by the safe harbor provision deadline (May 14, 2020) will be treated as though the employer had not received a “covered loan” under the PPP for purposes of the Employee Retention Credit (ERC). Accordingly, the employer will be eligible for the ERC if the employer otherwise meets the eligibility criteria of the ERC.
Attorney Advertising. The information contained in this Legal Alert provides a general summary of the topics covered and is not intended to be and should not be relied upon as legal advice. You should consult with your legal counsel for advice and before making legal, business or other decisions.
|Chu, Justin Y.K. General Counsel and Partner||General Counsel and Partner||212.216.1160|
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