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UPDATE: SBA PPP “Safe Harbor” Period Extended Until May 14, 2020 and More Clarification on Counting Company Affiliates

This is a follow-up from our May 5, 2020 Newsletter update regarding the SBA PPP “safe harbor” period, which was originally set to expire May 7, 2020. Late yesterday, the U.S. Treasury issued FAQ #43, which extends the SBA PPP “safe harbor” period to May 14, 2020. Borrowers do not need to apply for this extension; it is given as a matter of course.

FAQ #43 also makes clear that the SBA intends to provide, prior to May 14, 2020, additional guidance on how it will review the PPP "necessity" certification. If your company desires counseling regarding the guidance that is issued in the coming days, please let us know.

Additionally, FAQ #44 provides further clarification on how the 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. Specifically, U.S. Treasury guidance provides: “[f]or 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.” (emphasis added). This new guidance confirms the SBA’s affiliation rules apply to both U.S. and foreign affiliates and affirms that businesses 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 adhere to the same calculation. FAQ #44 is notable in that it appears to contradict prior FAQs and other interim guidance that indicated the PPP size standard only took into account employees whose principal place of residence is in the U.S. This is a developing area of the PPP guidance, and is likely to be the subject of additional clarification in the coming days.

Please contact Keith Galbut ([email protected]) or Grant Frazier ([email protected]) with any questions.


DISCLAIMER: This article is designed for general information only.  The information presented herein does not constitute legal advice or the formation of a lawyer/client relationship.