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. SUMMARY:On April 2, 2020, the U.S. Small Business Administration (SBA) issued an interim final rule (the Initial Rule) announcing the implementation of sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). As of October 7, 2020. 235: ‘Don’t Quit’ And The Rules That Define Jake Steinfeld’s Decades Of Success Beverage Industry Jobs Director of National Accounts, East - Kitu Life Inc - Super Coffee 02/10/2020 Agency: Small Business Administration Dates: Effective date: This rule is effective March 11, 2020. Below is the official answer from Q44 as of May 14, 2020. Affiliation Rules: The SBA has issued affiliation rules under the Small Business Act (13 CFR 121.103 and 13 CFR 121.301), which rules generally require aggregation of employees of businesses under common “control,” to The Small Business Administration, or SBA, said it considers ownership, management, contractual relationships and minority shareholders. By clicking "continue" and using this site, you acknowledge that you have read and understand this message. Business concerns seeking to qualify as a “small business concern” under section 3 of the Small Business Act (15 U.S.C. Exemptions from the affiliation rules that cover specific industries such as hotels, food preparation, and franchises were not granted for companies typically backed by venture capital firms. April 3, 2020 1. Application of Control Rules: As an initial matter, note that the SBA affiliation rules are waived relative to PPP for accommodation and food service companies (NAICS code 72) and certain franchisees and affiliates of companies licensed as SBICs. Question:The affiliation rule based on ownership (13 C.F.R. However, the Small Business Administration’s (SBA) broad affiliation rules could make many of those companies ineligible to participate unless the affiliation rules are relaxed. SBA Issues Second Interim Final Rule – Clarification of Partnership Filings, Individuals with Self-Employment Income and Affiliation Rules 04.15.2020 The CARES Act was enacted to provide immediate assistance to individuals, families and organizations affected by the COVID-19 pandemic. With the COVID-19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, tribal, and local public health measures that are being taken to minimize the public's exposure to the virus. The SBA affiliation rules also create an exception under 13 C.F.R. The SBA indicated that the FAQs would be updated on a regular basis. The affiliation rule … Below is the official answer from Q23 as of May 14, 2020. ÀjO The affiliation rules do not apply to faith-based organizations that would otherwise be qualified for PPP loans, but for affiliation. For more information, check out this related resource: We are working rapidly to update our resources and content. 44. Affiliation rules In determining a borrower’s eligibility for a PPP loan, the SBA will apply the guidelines set forth in Section 121.301 of the SBA’s regulations (subject to certain statutory and regulatory modifications). 2 The CARES Act only references 13 C.F.R. The SBA's size and affiliation rules, however, might make it challenging for companies that have taken venture capital, private equity or other investments to take advantage of these programs. The SBA has provided that an affiliation will exist when “concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or … The failure of small venture-backed businesses to qualify for Paycheck Protection Loans could cost more than 275,000 jobs this year directly and more 1 million jobs in total, including indirect losses. 85, No. AFFILIATION RULES APPLICABLE TO U.S. SMALL BUSINESS ADMINISTRATION PAYCHECK PROTECTION PROGRAM. 121. We are a private business providing resources for small businesses, including resources for PPP loans. 13 C.F.R. AGENCY:U. S. Small Business Administration. Given the amount of questions about the affiliate rules, the SBA has posted Affiliation Rules. This alert provides an overview of the SBA's size and affiliation rules. , which is different than the SBA Business Loan regulations upon which the PPP is based. SBA Affiliation Rules. §121.103(f), “[c]oncerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party controls or has the power to control both. The Trump administration should waive the Small Business Administration’s “affiliation rule” in this crisis to prevent these mass layoffs and furloughs. 121.301(f)(6). 632) on the basis of the employee-based size standard must do the same. The SBA has issued varied guidance and rules over the past week, most recently on April 3, 2020. Generally, in Under the Under the Regulations, most portfolio companies controlled (by … We have no affiliation with the U.S. Small Business Administration or any other government agency. The SBA may find affiliation based upon: Ownership – a company is an affiliate of another company if it owns or has the power to control more than 50 percent of the company’s voting equity. PPP 2.0 – New Round & Second-Draw Details, FAQ About Paycheck Protection Program (PPP) Loans, https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf, California Residents: Do Not Sell My Personal Information. Our separate post outlines the Paycheck Protection Program (“PPP”), which is administered by the U.S. Small Business Administration (SBA), and is a distinct component of the Act. This website is not a lender and does not broker loans, make loans or make any credit decisions. ruž ãf8bX‚ÞIÔ NZ'ïÇ7Y¨)À‚ôök€ù¥H¡4 ÒÅyR8ìCWž*Tñ¬*'â ¼*s«ª‡"Á¤mªˆË††­Ë°pž9o ¡ñÚ§d»°&¹VÒèXîm]sEíæ€CK§-õòôÛ>kf:ã¨Ü6:ßx@'¶SS—RQ]jq;Ðkô¾K{šy­bÜÆ 632) on the basis of the employee-based size standard must do the same. 13 C.F.R. Also, financial assistance from an SBIC is regulated by 13 C.F.R. 6. The SBA’s affiliation rules are broader than most common understandings of the affiliation concept, and will play a large role in determining whether or not a particular business is 1 This article discusses the current status as of publication on the evening of March 27, 2020. The SBA has issued a supplemental Interim Final Rule and related guidance regarding the applicability of affiliation rules to PPP loans. In order to create greater uniformity among SBA's various affiliation rules, SBA proposed to add to 121.301(f) a newly organized concern rule, similar to the one which had applied to the Business Loan Programs prior to the 2016 Link to an amendment published at 85 FR 66178, Oct. 16, 2020. These meas… To determine an applicant's affiliates, applicants and lenders should refer to the pre-2020 version of the rule.7 Section 1 102(e) of the CARES Act permanently rescinds an amendment that SBA issued in February. So long as a franchise brand is listed on the SBA Franchise Directory, each of its franchisees that meet the SBA’s applicable size standard are eligible to apply for its own PPP loan. The guidance also reinforces that applicants must consider affiliation rules as part of their PPP eligibility determination. seq. None of the information on this site constitutes legal advice. Effective Date: 03/11/2020 Document Type: Rule Document Citation: 85 FR 7622 Page: 7622-7652 (31 pages) CFR: 13 CFR 103 13 CFR 120 13 CFR 121 RIN: 3245-AG74 Document Number: 2020-02128 Below is the official answer from Q44 as of May 14, 2020. Applicability date: This interim final rule applies to applications submitted under the Paycheck Protection Program through June 30, 2020, or until funds affiliate rules applicable to SBA’s implementation of sections 1102 and 1106 of the Act and requests public comment. 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