On April 30, 2020, the U.S. Small Business Administration (“SBA”) posted a seventh Interim Final Rule on Corporate Groups and Non-Bank and Non-Insured Depository Institution Lenders. This Interim Final Rule supplements the previously posted interim final rules by limiting the amount of Paycheck Protection Program (“PPP”) loans that any single corporate group may receive, and provides additional guidance regarding the eligibility of non-bank and non-insured depository institution lenders to make PPP loans. Our summary will focus on sections of this Interim Final Rule which supplement previous guidance for borrowers:
- Section 1 indicates that to preserve the limited resources available to the PPP program, and in light of the previous lapse of PPP appropriations and the high demand for PPP loans, businesses that are part of a single corporate group shall in no event receive more than $20 million of PPP loans in the aggregate. For purposes of this limit, businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent. This limitation shall be immediately effective with respect to any loan that has not yet been fully disbursed as of April 30, 2020. For loans that have already been partially disbursed, this limitation applies to any additional disbursement that would cause the total PPP loans to a single corporate group to exceed $20 million.
It is the responsibility of an applicant for a PPP loan to notify the lender if the applicant has applied for or received PPP loans in excess of the amount permitted by this Interim Final Rule and withdraw or request cancellation of any pending PPP loan application or approved PPP loan not in compliance with the limitation set forth in this rule. Failure by the applicant to do so will be regarded as a use of PPP funds for unauthorized purposes, and the loan will not be eligible for forgiveness. A lender may rely on an applicant’s representation concerning the applicant’s compliance with this limitation.
This Interim Final Rule does not address whether corporate groups that received PPP loans of over $20 million prior to April 30 need to repay or return loan amounts in excess of this threshold. Members of corporate groups currently applying for PPP loans should determine whether the corporate group has already received or will receive more than $20 million in loans in aggregate, and should contact their lender to withdraw the loan application or cancel the loan.
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For additional information on the Paycheck Protection Program, as well as other Federal, state and local relief measures, please visit our COVID-19 Resource Center on our website. If you have any questions, please contact your Tronconi Segarra & Associates advisor or a member of our response team at covid19team@tsacpa.com
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