Expanded SBA Size Standards Eligibility Under PPP Loan. To qualify as a “small business” for the purpose of the Paycheck Protection Program, a business must have fewer than 500 employees, whether small businesses, sole proprietors, LLCs, S or C corporations, self-employed or contractors. Applicants with more than 500 employees are eligible borrowers under the PPP if they meet the definition of a “small business concern” under the employee-based or revenue-based size standards set by the SBA. For more information on affiliation rules, please see our prior client alert published on April 6, 2020: What Counts Towards 500? The SBA notes: “A size standard, which is usually stated in number of employees or average annual receipts, represents the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA and federal contracting programs. | Insights On April 2, 2020, the U.S. Small Business Administration (SBA) released an interim final rule (the Initial Rule) announcing the SBA’s formal interpretation of the implementation of the Paycheck Protection Program (PPP), which was created by Sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).. In an effort to achieve this goal, the SBA consolidated all of its applicable size standards, new and old, in an effort to expand eligibility and relief. SBA will consider the totality of the circumstances, including criteria used by the IRS for Federal income tax purposes, in determining … Under general SBA regulations, to be considered “small,” the size of the business alone must not exceed the size standard designated for the industry in which the applicant is primarily engaged. The principal place of residence of the employee is not relevant for purposes of this headcount. The PPP is administered as part of the SBA's 7(a) loan program. What Counts Towards 500? Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.”, The SBA notes: “The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Money spent on payroll, utilities, rent or mortgage debt interest qualifies. PPP Size Requirements, Copyright © 2020 Heavy, Inc. All rights reserved. In an effort to achieve this goal, the SBA consolidated all of its applicable size standards, new and old, in an effort to expand eligibility and relief. The CARES Act: Which Small Business Loan is Right for Your Business? This brief client alert is meant to bring some clarity to the issue. This piecemeal rollout of rules and guidance has created an inconsistent roadmap to navigate the unprecedented intricacies of the PPP Loan. The SBA connects entrepreneurs with lenders and funding to help them plan, start and grow their business. Loan payments will also be deferred for six months. SBA.COM® PAYCHECK PROTECTION PROGRAM (PPP) INFORMATION SHEET: This is a modified version of the official PPP Information Sheet published by the U.S. Department of Treasury here on April 3, 2020. This includes employees obtained from a temporary employee agency, professional employee organization or leasing concern. | CARES Act | Regulatory/Policy Issues. SBA also includes the table of size standards in the Small Business Size Regulations, 13 CFR § 121.201. In order to be eligible for the PPP loans and EIDL program, as well as the Emergency EIDL grant program, a company must meet the SBA's existing "small business concern" standards, as modified by the CARES Act. Size Matters When Determining Eligibility. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. One intent of the PPP Loan is to provide economic relief to as many small businesses affected by COVID-19 as possible. The Small Business Administration's (SBA) Payroll Protection Program (PPP) was created to help small businesses negatively impacted by the COVID-19 pandemic. This means each store location could be eligible.”. Do “small business concerns” as defined by the U.S. SBA Act need to have 500 or fewer employees to be qualified for the PPP? SBA size standards have been established for most economic activity, or industries, under the North American Industry Classification System (NAICS). In addition, a business may qualify for a PPP loan if it meets the SBA's "alternative size standard:" maximum net worth of the business is not more than $15 million and the average net income after Federal income taxes (excluding any carry-over loses) of the business for the two full fiscal years before the date of the application is not more than $5 million. In general, companies may be eligible under the PPP (if they are not disqualified by the SBA's affiliation rules) if they (a) have fewer than 500 employees (or an alternative SBA size standard based on industry), (b) were in operation on February 15, 2020 and (c) have suffered business disruption as a result of COVID-19. § 121.103, the SBA will aggregate a business concern and all affiliated companies to calculate size under the size standards. Since April 3, 2020, the SBA has provided guidance relating to the PPP, including guidance titled "Affiliation Rules Applicable to U.S. Small Business Administration Paycheck Protection Program," and a Letter Re: Size Eligibility and Affiliation Under the CARES Act. As a result, any business is eligible for a PPP Loan if it meets the criteria on any one of the following size standards: With eligibility now available under any one of these measurements for size standards, the SBA has expanded access to PPP Loans for many businesses that were otherwise ineligible under previous regulations or the initial interpretation of the Interim Final Rule. You can find the NAICS code for your industry using the online search tool available here. Average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million. Use the Document Below to Find the SBA Size Standards based on Total Employees or Dollars for any given NAICS Code. Accordingly, please do not send us information about any specific matter that may involve you unless you are a client and have received a written statement from us that we represent you (an “engagement letter”). April 9, 2020 borrower is a small business concern as defined in section 3 of the Small Business Act (15 U.S.C. Expanded SBA Size Standards Eligibility Under PPP Loan. Under the SBA’s affiliation rules, as set forth in 13 C.F.R. Employee Calculations and Affiliation Rules Under SBA Regulations. You’ll need to search for your NAICS code and then enter your three-year average for annual receipts/revenue (generally total receipts/revenue plus cost of goods sold over three years). (a) In determining a concern's number of employees, SBA counts all individuals employed on a full-time, part-time, or other basis. It was published as Question #44 in the Paycheck Protection Program Loans Frequently Asked Questions (FAQs). New York City. The U.S. Small Business Administration (“SBA”) recently published a memorandum (the “Memorandum”) and new Frequently Asked Questions (“FAQs”) (available here) clarifying the size standards and affiliation rules applicable to the Paycheck Protection Program (the “Program” or “PPP”). If you’re not eligible, you can still try the SBA’s disaster assistance loan program. CLICK TO DOWNLOAD Aug 2019 Version. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Is Enacted Into Law, Back to Basics: SBA Size Standards Eligibility Under The Paycheck Protection Program (PPP Loan), More than 500 employees but less than employee-based threshold established by the NAICS Code for the applicant’s industry (, Average annual receipts for last three full fiscal years is less than revenue-based threshold established by the NAICS Code for the applicant’s industry (, Maximum tangible net worth of the business is not more than $15 million; and. Neither the government nor lenders will charge small businesses any fees.”, So that’s an important caveat to note. Employee Calculations and Affiliation Rules Under SBA Regulations. One intent of the PPP Loan is to provide economic relief to as many small businesses affected by COVID-19 as possible. Summary of Size Standards by Industry Size guidelines define the maximum size that a firm (including its affiliates) can be to qualify as a small business for most SBA programs. On April 6, the Small Business Administration (“SBA”) provided an “alternative size standard” under which employers may qualify under the PPP program. Additionally, affiliation rules apply, and if applicable, the size of the applicant combined with its affiliates must not exceed the size standard designated for either the primary industry of the applicant alone or the primary industry of the applicant and its affiliates, whichever is higher. The SBA's table of small business size standards helps small businesses assess their business size. Use the Size Standards Tool here to see if your business qualifies. 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