The US Small Business Administration has extended the safe harbor period for PPP loan return until May 14, 2020, stated that it will provide further guidance regarding the PPP necessity certification, and added confusion regarding the employee-size standard.

In yesterday’s FAQ #43, the US Small Business Administration (SBA) stated:

  1. Question: FAQ #31 reminded borrowers to review carefully the required certification[1] on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?

Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

And in FAQ #44 (also posted yesterday):

  1. Question: How do SBA’s affiliation rules at 13 C.F.R. 121.301(f) apply with regard to counting the employees of foreign and U.S. affiliates?

Answer: For purposes of the PPP’s 500 or fewer employee 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. 13 C.F.R. 121.301(f)(6). Business concerns seeking to qualify as a “small business concern” under section 3 of the Small Business Act (15 U.S.C. 632) on the basis of the employee-based size standard must do the same.

FAQ #44 seems inconsistent with earlier guidance that, for purposes of the employee-size standard, only employees “whose principal place of residence is in the United States” needed to be included[2].

[1] Discussed in our earlier COVID-19 blog postings on April 23, 2020 “Clear as Mud: SBA Offers Further Clarification to PPP Eligibility)” and April 28, 2020 “Still Clear as Mud (Unfortunately): SBA’s Latest Official FAQ Fails to Provide Meaningful Guidance for Potential PPP Borrowers”.

[2] In particular, this FAQ is at odds with the earlier FAQ #3 and with the SBA’s April 2, 2020 Interim Final Rule which stated that, to be an eligible borrower under the PPP, an entity generally is eligible for the PPP if it, combined with its affiliates, has 500 or fewer employees whose principal place of residence is in the United States.

 

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