The Small Business Administration (SBA) updated its guidance Frequently Asked Questions
(FAQ) on Paycheck Protection Program (PPP) Loans and issued a new interim final rule*
On April 23, 2020, the SBA issued a new guideline for PPP applicants. It was published as Question #31 in the Paycheck Protection Program Loans Frequently Asked Questions (FAQs). Question #31 provides additional
information relating to whether certain entities may qualify for PPP loans based on their need for the funds to support ongoing operations. The guidance also reinforces that applicants must consider affiliation rules as part of their PPP eligibility determination.
On April 24, 2020, the SBA issued a new interim final rule further clarifying affiliation and eligibility. Hedge funds and private equity firms that are primarily engaged in investment or speculation are ineligible to receive a PPP loan. Further, applicants that are owned by a portfolio company or a private equity fund must take into account the SBA affiliation rules. The interim final rule also references the safe harbor that was introduced in PPP FAQ.
We are urging all of our clients to re-assess their eligibility for the program and their ability to accurately make the required certifications in light of these updates so that they can determine whether repayment of their loan
is appropriate. If upon consideration of the newly issued guidance and interim final rule, the borrower determines that they do not need the funds to support ongoing operations, the SBA allows the borrower to repay the loan in full prior to May 7, 2020. We recommend that you contact your legal counsel immediately should you have any questions or uncertainty.
The full text of the SBA FAQ on PPP Loans can be accessed here.
The full text of the SBA interim final rule can be accessed here.
Below are excerpts (edited for formatting only) from
- the SBA FAQ on PPP Loans (updated 4/23/2020), and
- the interim final rule (issued 4/24/2020).