The Treasury has released several pieces of additional guidance relating to the Paycheck Protection Program (“PPP”) loans. This guidance addresses several open questions on the program. Below is a summary of some of the main points:
- How to Calculate Maximum Loan Amounts – By Business Type. The Treasury released helpful guidance through a series of questions and answers for businesses in calculating their payroll costs for purposes of determining the amount of a PPP loan businesses can apply for. Businesses who have not yet submitted an application or are unsure on how to calculate their loan amount, should reference the examples provided therein.
- Clarification Regarding Eligible Businesses.
- Private Equity Firms and Hedge Funds: The Treasury’s interim rule posted on April 24, 2020, provides additional information on certain business types. The rule confirmed that hedge funds and private equity firms are ineligible to receive PPP loans. As well, the SBA affiliation rules apply to private equity-owned businesses in the same manner as any other business subject to outside ownership or control. However, in a footnote, the guidance provides that the affiliation rules are waived if the borrower receives financial assistance from an SBA-licensed Small Business Investment Company (SBIC) in any amount. This includes any kind of financing, such as loans, debt with equity features, equity, and guarantees.
- Hospitals: A hospital that is otherwise eligible to receive a PPP loan as a business or nonprofit organization is not rendered ineligible due to ownership by a state or local government if the hospital receives less than 50% of its funding from state or local government sources, exclusive of Medicaid.
- Employee Stock Ownership Plans (“ESOP”): For purposes of the PPP, a business’s participation in an ESOP does not result in an affiliation between the business and the ESOP.
- Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan Request. The Interim Rule codified the SBA’s prior guidance regarding the borrower’s certification concerning the need for the PPP loan, which we discuss in further detail in this prior LEGALcurrents. The guidance provides that borrower’s that applied for a PPP loan prior to the issuance of the regulation, that repays the loan in full by May 7, 2020, will be deemed by the SBA to have made the required certification in good faith.
- Additional Criterion for Seasonal Employees. The Treasury’s interim rule posted on April 27, 2020, provides additional information in relation to the maximum loan amount for seasonal employers. Under this interim final rule, a seasonal employer may alternatively elect to determine its maximum loan amount as the average total monthly payments for payroll during any consecutive 12-week period between May 1, 2019 and September 15, 2019.
If you have additional questions or want to discuss this new guidance, please reach out to a member of our Corporate practice group for assistance.