On Monday, May 4, the SBA will issue another Interim Final Rule updating the Paycheck Protection Program—this time limiting the “aggregate amount of PPP loans that any single corporate group may receive.”
Under the new Interim Final Rule, “businesses that are part of a single corporate group shall in no event receive more than $20,000,000 of PPP loans in the aggregate.” This means, for example, that any parent company and its subsidiaries, combined, cannot receive more than a total of $20 Million in PPP loan money.
The SBA cites the “previous lapse of PPP appropriations and the high demand for PPP loans” as the basis for this change, which will impact “any loan that has not yet been fully disbursed as of April 30, 2020.”
Notably, the new Rule is wholly separate from the SBA’s previous guidance on how affiliation applies for purposes of PPP loans (discussed here). Indeed, it states that companies must comply with the $20 Million limit, “even if the [applicant] businesses are eligible for the waiver-of affiliation provision under the CARES Act” including those in Accommodation and Food Services industries, franchises, or companies receiving assistance under SBA section 301, “or are otherwise not considered to be affiliates under SBA’s affiliation rules.”
In addition, the new Rule makes it the “responsibility of an applicant for a PPP loan to notify the lender if the applicant has applied for or received PPP loans” exceeding the $20 Million limit and “withdraw or request cancellation of any pending PPP loan application or approved PPP loan not in compliance with the limitation[.]” If a PPP applicant fails to comply with this responsibility, the applicant will face a steep penalty: it will be deemed to have used “PPP funds for unauthorized purposes, and the loan will not be eligible for forgiveness.”
All in all, the new Rule seems to answer some questions that other rules (including the SBA’s April 28 Interim Final Rule, discussed here) do not, namely, what happens if a company fails to comply. Hopefully this Rule will help preserve funds for eligible businesses and prevent abuse of the PPP as a whole.