Update: Affiliation Under the Paycheck Protection Program


The Paycheck Protection Program (“PPP”) officially launched April 3, 2020. In the application for a PPP loan, applicants are required to disclose if the applicant or any owner of the applicant is an owner of any other business, or has common management with, any other business and if so, for the applicant to list such businesses and the relationships. This question relates to eligibility to receive a PPP loan as only businesses with 500 or fewer employees qualify (unless the applicant falls in one of the exceptions as provided in our previous posts).

In most cases, an applicant will be considered together with its affiliates for purposes of determining eligibility for a PPP loan. Under SBA rules, entities may be considered affiliates based on factors including stock ownership, overlapping management and identity of interest.

As promised in the Interim Final Rule, the SBA has issued guidance to applicants of the affiliation rule applicable to the PPP. Below is a summary of the SBA’s affiliation guidance:

Exceptions to the affiliation rules: (1) A business concern with fewer than 500 employees that is assigned a NAICS code beginning with 72; (2) a franchise; and (3) any business concern that receives financial assistance from a company licensed under section 301 of the Small Business Investment Act of 1958.


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National Law Review, Volume X, Number 97