Restaurants and those in the hospitality business with more than one location might be able to qualify for specific store loans if a store has fewer than 500 employees, the SBA notes. CLICK TO DOWNLOAD Aug 2019 Version. You’ll need to know your average monthly payroll in order to apply. Powered by. | CARES Act | Regulatory/Policy Issues. borrower is a small business concern as defined in section 3 of the Small Business Act (15 U.S.C. SBA’s existing affiliation exclusions apply to the PPP, In an effort to achieve the goals of the PPP Loan, the SBA has consolidated all of its applicable size standards, new and old, in an effort to expand eligibility and relief under the CARES Act. One intent of the PPP Loan is to provide economic relief to as many small businesses affected by COVID-19 as possible. Additional information on the PPP has been summarized in a recent blog. Use the Size Standards Tool here to see if your business qualifies. Size Matters When Determining Eligibility. To help small business owners assess their small business status, SBA has established a Table of Small Business Size Standards. Method 1: SBA Employee-Based Size Standards. The SBA's table of small business size standards helps small businesses assess their business size. One major component to the PPP Loan that is easily misinterpreted is the rule regarding SBA’s size standards for eligibility, leaving potential relief for countless businesses on the table. 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. No collateral or personal guarantees are required. As far as who’s eligible for the loan forgiveness part, that is going to apply to expenses for eight weeks from when the loan starts. Money spent on payroll, utilities, rent or mortgage debt interest qualifies. 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). What Counts Towards 500? Employee Calculations and Affiliation Rules Under SBA Regulations. 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. Question #44 provides further … Read … This piecemeal rollout of rules and guidance has created an inconsistent roadmap to navigate the unprecedented intricacies of the PPP Loan. PPP Size Requirements, Copyright © 2020 Heavy, Inc. All rights reserved. § 121.103, the SBA will aggregate a business concern and all affiliated companies to calculate size under the size standards. You can see the size standards on the SBA’s website here. According to Smart Asset, loans can be for up to $10 million, for two times the cost of payroll plus 25%. This means each store location could be eligible.”. Disclosure: We would like to hear from you, but cannot represent you unless we know that doing so would not create a conflict of interest, or would require us to practice law in states or courts where we are not licensed to practice or give advice. Here's a look at who is eligible for the Paycheck Protection Program SBA loans, including PPP size requirements for businesses. If you’re an independent contractor or otherwise self-employed, you can start applying on April 10. According to the new rule and FAQ #44, all employees of affiliates are to be counted for purposes of determining if the SBA’s employee size standards are met for purposes of PPP eligibility. The Small Business Administration (SBA) updated its Frequently Asked Questions (FAQ) on Paycheck Protection Program (PPP) Loans regarding the employee size standard* On May 5, 2020, the SBA issued a new guideline for PPP applicants. In addition, a business with more than 500 employees might still qualify if it meets the SBA’s size standards for that particular industry. New businesses can use the time period from January 1, 2020 to February 29, 2020, with the same exclusion noted above. 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. You can find the NAICS code for your industry using the online search tool available here. One intent of the PPP Loan is to provide economic relief to as many small businesses affected by COVID-19 as possible. If you’re applying for a loan via the Paycheck Protection Program (PPP), read on for more details about who is eligible to participate in this program. How to calculate average annual receipts and average employment of a firm can be found in 13 CFR § 121.104 and 13 CFR § 121.106, respectively. The SBA has a series of regulations that govern what businesses are eligible for these loans. Expanded SBA Size Standards Eligibility Under PPP Loan. 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).. Businesses Must Have Fewer than 500 Employees or Meet the ‘Size Standard’ Requirement for Their Industry. 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. Additionally, farms can qualify for PPP if it meets SBAs alternative size standard. 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. In connection with eligibility standards, the SBA issued FAQs on April 6, 2020, which, while not law, stated that a business may be eligible for a PPP loan even if it has more than 500 employees, as long as the business meets either the SBA employee-based or revenue-based size standard corresponding to its primary industry. DATA APPENDS. The loan will begin as a two-year, .5% interest loan, at least part of which will convert into a grant. 632(a)(2)(C)(ii)(II), to modify the requirements for proposed small business size standards prescribed by an agency without separate statutory authority to issue size standards. 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. Size standards have been established for most types of economic activity, or industry, generally under the North American Industry Classification System (NAICS). New York City. What Counts Towards 500? It was published as Question #44 in the Paycheck Protection Program Loans Frequently Asked Questions (FAQs). Accurately Update, Cleanse, and Append Mission-Critical Data to your existing Customer Database. The SBA connects entrepreneurs with lenders and funding to help them plan, start and grow their business. 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. Employee Calculation and Affiliation Rules Under SBA Regulations. SBA’s size standards govern whether a business is eligible for loans administered by the SBA, such as the EIDL, PPP Loan, and other Business Loan programs under … However, if a business lays off employees in the first eight weeks, the amount forgiven will be reduced, Inc. reported. SBA now states that an employer will qualify for PPP if it meets both of the following tests: Employer’s maximum tangible net worth on March 27, 2020, is not more than $15 million; and Loan payments will also be deferred for six months. 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. What are the SBA size standards and how are they applicable to SBA loan programs? (a) In determining a concern's number of employees, SBA counts all individuals employed on a full-time, part-time, or other basis. Under the PPP Loan, a business is considered “small” if it meets one of the criteria based on three different measurements for size standards: 1) employee-based measurement; 2) revenue-based measurement; or 3) alternative-based measurement. The SBA notes this is typically the average monthly payroll for 2019, excluding costs over $100,000 on “an annualized basis for each employee.” For seasonal businesses, you can use an average monthly payroll for February 15, 2019 to June 30, 2019. 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. Since the passage of the CARES Act on March 27, 2020, the Small Business Administration (“SBA”) and U.S. Treasury Department (“Treasury”) have published an Interim Final Rule for the PPP Loan, Interim Final Rule for Affiliation and several pieces of guidance material, including an FAQ for Borrowers and Lenders. SBA size standards have been established for most economic activity, or industries, under the North American Industry Classification System (NAICS). Clarification of Eligibility Requirements. If you’re not eligible, you can still try the SBA’s disaster assistance loan program. If you’re a small business or a sole proprietor, you may be eligible and you can apply starting on Friday, April 3, Inc. reported. The definition of small varies by industry.”. 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. ... (NAICS Code 211130) with 1,000 employees would still be eligible for PPP funds because the applicable SBA employee-based size standard is 1,250. One of the most important rules addresses the size of eligible businesses, referred to as the size standards. In general, SBA’s size standards govern whether a business is considered “small” and, thus, eligible for a PPP Loan. One intent of the PPP Loan is to provide economic relief to as many small businesses affected by COVID-19 as possible. Employee Calculations and Affiliation Rules Under SBA Regulations. SBA will consider the totality of the circumstances, including criteria used by the IRS for Federal income tax purposes, in determining … This alert provides an overview of the SBA's size and affiliation rules. ), Who’s Eligible for the Paycheck Protection SBA Loans? The alternative size standard is currently: (1) a maximum net worth of the business not more than $15 million, AND (2) the average net income Federal income taxes of the business for the … A borrower must certify on the Borrower Application Form that the borrower is eligible to receive a PPP loan, and that certification means that the borrower is a small business concern as defined in Section 3 of the Small Business Act (15 U.S.C. The CARES Act provides a 500 employee size standard, which a business may use regardless of whether the applicant qualifies as a small business under SBA’s two existing size standards. April 9, 2020 The Small Business Administration's (SBA) Payroll Protection Program (PPP) was created to help small businesses negatively impacted by the COVID-19 pandemic. the most part, size standards are the average annual receipts or the average employment of a firm. This includes employees obtained from a temporary employee agency, professional employee organization or leasing concern. Dozens of … Businesses with more than 500 employees can still qualify for the PPP if they they meet special size standards for the primary industry in which they operate. Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. On April 6, the Small Business Administration (“SBA”) provided an “alternative size standard” under which employers may qualify under the PPP program. Public Law 115-324 (the “Small Business Runway Extension Act of 2018”) amended section 3(a)(2)(C)(ii)(II) of the Small Business Act, 15 U.S.C. Under section 3(a)(2)(C)(ii) of the Small Business Act, as amended, an agency without separate statutory authority to issue size standards must satisfy three requirements to prescrib… Here’s exactly what the SBA says about who is eligible: This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. 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”). According to the SBA, a loan will only be forgiven if at least 75% of the forgiven part is used for payroll expenses. SBA also includes the table of size standards in the Small Business Size Regulations, 13 CFR § 121.201. If you have specific questions as to your business or would like us to discuss your eligibility further, please do not hesitate to contact us. 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. Click for PDF. 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”). Use the Document Below to Find the SBA Size Standards based on Total Employees or Dollars for any given NAICS Code. In Q&A 2, SBA provided an “alternative size standard” under which employers may qualify under the PPP program and also opened up eligibility to employers that qualify under either the revenue based size standard or employee based size standard defined in the SBA regulations for their primary NAICS code. Getty You can also find the size standard for a specific industry at 13 CFR 121.201. 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. Under the PPP Loan, the SBA considers a business “small” if it meets the one of the criteria based on three different measurements for size standards: 1) employee-based measurement; 2) revenue-based measurement; or 3) alternative-based measurement. 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. For now, the SBA has indicated that the normal affiliation standards for SBA 7(a) loans, as set out in 13 C.F.R. The CARES Act: Which Small Business Loan is Right for Your Business? 632), meets the applicable SBA employee-based or revenue-based size standard, or meets the tests in SBA’s alternative size standard, after applying the affiliation rules, if applicable. The SBA writes: “Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. 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. 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? | Authored Article SBA size standards and affiliation, generally. 3. The PPP is administered as part of the SBA's 7(a) loan program. Neither the government nor lenders will charge small businesses any fees.”, So that’s an important caveat to note. To qualify as a “small business” for … Under the SBA’s affiliation rules, as set forth in 13 C.F.R. We support America's small businesses. For more information on affiliation rules, please see our prior client alert published on April 6, 2020: What Counts Towards 500? 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. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. The SBA’s size standards determine whether or not your business qualifies as small. (Originally, it looked like more expenses would qualify no matter how they were divided, but that’s changed. This brief client alert is meant to bring some clarity to the issue. April 9, 2020. Expanded SBA Size Standards Eligibility Under PPP Loan. | Insights 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. 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