sba affiliation rules disaster loan

The specific SBA regulation regarding affiliation principles applicable to financial assistance programs is 13 C.F.R. %%EOF Section 1114 of the Act directs the SBA to pass regulations to implement the Act by April 11, 2020. Reg. § 121.301. “Employees” include all individuals employed by the business on a full-time or part-time basis. On April 2, the SBA released the . In the meantime, please refer to our client alerts COVID-19 Relief: Understanding SBA Loan Opportunities Under the CARES Act and COVID-19 Relief: Small Business Loan Forgiveness under the CARES Act for additional information. The CARES Act states that the SBA’s affiliation rules apply regarding eligibility determinations for Paycheck Protection Loans.1 Therefore, to properly analyze whether a company is a qualifying “small business,” one must understand the SBA’s complex affiliation rules. Applicants should also understand that if their application is not approved based on an adverse size determination (e.g., too many employees based on affiliation), they can appeal the decision to the SBA’s Office of Hearings and Appeals (OHA). SBA Office of Disaster Assistance | 1-800-659-2955 | 409 3rd St, SW. Washington, DC 20416 For most 7 (a) loan programs, the SBA can guarantee up to 85 percent of loans of $150,000 or less, and up to 75 percent of loans above $150,000. Notably, the CARES Act waives the SBA’s affiliation rules for determining PPP program eligibility for certain specific categories of businesses, including businesses in the Accommodation and Food Services Industry with 500 or fewer employees, businesses operating as a franchise that are assigned a franchise identifier code in the SBA Franchise Directory (available here), and businesses … %PDF-1.7 %���� § 121.103, which are similar. h��{io\G��_��6z�*�0h�ښ��. SBA contact information: SBA Customer Service Center: (800) 659-2955 or email at disastercustomerservice@sba.gov Affiliation determinations are significant under the PPP because the applicant and each “affiliate” is viewed as one business for purposes of calculating the number of employees. 8 See Affiliation for Business Loan Programs and Surety Bond Guaranty Program, 81 Fed. 9 For clarity, the June 2016 Final Rule only amended the affiliation rules with regards to the Business Loan, Disaster Loan and Surety Bond Guarantee Program. Learn about the four tests for affiliation and how they apply to participants in the Paycheck Protection Program. Pillsbury’s experienced crisis management professionals are closely monitoring the global threat of COVID-19, drawing on the firm’s capabilities in supply chain management, insurance law, cybersecurity, employment law, corporate law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. As discussed in our previous alert here, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed on March 27, 2020, appropriated approximately $350 billion for forgivable Paycheck Protection Loans, which will soon be available through banks, credit unions and other SBA-approved lenders (and guaranteed by the government). April 5, 2020. 13 C.F.R. You may also contact any of the points of contact at the bottom of this document to receive a copy of the rules. After using these rules to properly identify affiliated companies, potential borrowers must aggregate the respective employee tallies of each affiliated company to determine whether they are within the size limitation. CARES ACT: UNDERSTANDING SBA'S LOAN ELIGIBILITY REQUIREMENTS, INCLUDING AFFILIATION RULES Publication CARES ACT: UNDERSTANDING SBA'S LOAN ELIGIBILITY REQUIREMENTS, INCLUDING AFFILIATION RULES Authors Joshua A. Mullen, Donald Jeffrey Wagner March 30, 2020 On Friday, March 27, 2020, President Donald J. Trump signed into law the Coronavirus Aid, Second homes and vacation properties are not eligible, although certain rental properties may qualify for an SBA business disaster loan. § 121.301. Historically, disasters have been declared for catastrophic events like hurricanes, earthquakes and floods, and are limited to a state or territory. Loans will be guaranteed under the PPP under the same terms, conditions and processes as other 7(a) loans, with certain changes including but not limited to: The guarantee percentage is 100 percent. 7. SBA’s rules on affiliation for its programs (except SBIR and STTR) are found at 13 C.F.R. (8) For applicants in SBA's Business Loan, Disaster Loan, and Surety Bond Guarantee Programs, the size standards and bases for affiliation are set forth in § 121.301. We will continue to monitor the forthcoming regulations. § 121.301, promulgated in 2016. !`[���վL�,���iB�g���#@� Bg SBA's affiliation rules confirm whether the annual receipts or number of employees of other entities need to be added to the applicant's numbers when determining size. - According to SBA’s guide to size and affiliation rules, when calculating the size of your business, you must include the annual receipts and employees of your domestic and for… 1051 0 obj <> endobj With that said, the Act also expressly waives the SBA’s affiliation rules for three types of businesses: (1) industry “Sector 72,” which applies to Accommodation and Food Services, such that businesses within this sector qualify for new loans as long as they do not have more than 500 employees at any given location; (2) franchises that are approved on the SBA’s Franchise Directory; and (3) small businesses that receive financing through the Small Business Investment Company program. We recommend that you obtain separate legal advice. Since 2016, the SBA has used separate affiliation rules specifically tailored to its loan programs under 13 C.F.R. §§ 109, 115, 120-21). [T]he detailed affiliation standards contained in section 121.103 currently do not apply to PPP borrowers, because section 121.103(a)(8) provides that applicants in SBA’s Business Loan … This Executive Order “Improving Regulation and Regulatory Review,” provides that agencies “must identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends.” (Emphasis ad… The Small Business Administration (SBA) is publishing this rule to rescind the regulations published on February 10, 2020, in the interim final rule (IFR) titled, ``Express Loan Programs; Affiliation Standards'' (Express IFR). Any business—including any business concern, 501(c)(3) nonprofit organization, veterans organization or Tribal business concern, as well as individuals who operate as sole proprietorships or independent contractors, or are self-employed—operational as of February 15, 2020 with no more than 500 employees (unless the company’s primary industry classification code, available here, allows for a greater number of employees) is eligible to apply for a Paycheck Protection Loan. By Cecilia Wang, Jenny Y. Liu, Alexander B. Ginsberg, David B. Dixon. The SBA recognizes numerous ways in which an individual or company may be deemed to control—and, thus, be affiliated with—another company. The regulations are available online at http://www.ecfr.gov. § 121.301. § 121.301(f)(8). It states that for both Business Loans (like the Paycheck Protection Loans) and Disaster Loans, an applicant business concern must satisfy two criteria: SBA is revising its regulations on affiliation for the Business Loan, Disaster Loan, and SBG Programs by separating and distinguishing the rules from the Agency's government contracting, business development and other programs. However, there are exceptions to the affiliation rules including for: o Business concerns in the Accommodation and Food Services industries with not more than The SBA’s affiliation rules for financial assistance programs are found in 13 C.F.R. For these businesses, the affiliation rules are waived for loans issued before June 30, 2020. The business receiving the loan must be deemed a Small Business based on North American Industrial Classification System (NAICS) code, annual receipts, and the average number of people employed per pay period. interim final rule. �n���3�N�Vj���˼@�ޟI%�� ��M�Qp�����O�4�ی��?��Td{�L�6�G@�3�ޞ p��3Ȏݶ�E�d����ͼ8::::�L;@���``� 1AL�0��\" �@*@���ژ!���l`�I9j(D7�����+A(&�,G�Z0���k���@Z���"��!LL�L�L�4O3�1�b�� z�����G��x慰0 ���0�d�g�2�������������n2Ng�i��K�>lb��4�}H�1�)iF��xJ�g`S��������mȡ�l�}�� s��� There are also certain existing exceptions to SBA affiliation rules which apply to the PPP program included in 13 CFR 121.103(b), for example, businesses owned and controlled by Indian tribes. h�b```�s�bB cc`a��������� V���0��n��} According to MerchantMaverick, “ To be eligible for an Economic Injury Disaster Loan through the SBA, you’ll need to be located in a disaster declared county or a contiguous county. 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