Paycheck Protection Program Loans FAQs, March 12, 2021 — Small Business Administration
- Date
- 2021-03-12
Summary
Frequently Asked Questions on Paycheck Protection Program loans issued by the Small Business Administration, in consultation with the Department of the Treasury, as of March 12, 2021, covering First Draw and Second Draw PPP Loans. The document states that borrowers and lenders may rely on it as SBA's interpretation of the CARES Act, the Economic Aid Act and the PPP Interim Final Rules; a footnote states it does not carry the force and effect of law independent of those statutes and regulations. The opening questions address lender review of payroll calculations, size standard eligibility, affiliation rules under 13 C.F.R. 121.301(f), the $100,000 compensation exclusion, seasonal businesses, payroll providers, signatures and owners' criminal history. It closes with Question 66, on changing a loan amount calculation depending on the loan's status.
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Full text
As of March 12, 2021
PAYCHECK PROTECTION PROGRAM LOANS
Frequently Asked Questions (FAQs)
The Small Business Administration (SBA), in consultation with the Department of the Treasury,
intends to provide timely additional guidance to address borrower and lender questions
concerning the implementation of the Paycheck Protection Program (PPP), including both First
Draw PPP Loans and Second Draw PPP Loans. This document will be updated on a regular
basis.
Borrowers and lenders may rely on the guidance provided in this document as SBA’s
interpretation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (as
amended), the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
(Economic Aid Act), and of the Paycheck Protection Program Interim Final Rules (“PPP Interim
Final Rules”)(link). The U.S. government will not challenge lender PPP actions that conform to
this guidance, 1 and to the PPP Interim Final Rules and any subsequent rulemaking in effect at the
time the lender’s action is taken.
1. Question: Paragraph 3.b.iii of the first PPP Interim Final Rule, subsection C.3.c. of the
consolidated interim final rule implementing updates to PPP, and subsection (h)(2)(i)(C)
of the interim final rule for Second Draw PPP Loans state that lenders must “[c]onfirm
the dollar amount of average monthly payroll costs . . . for the preceding calendar year by
reviewing the payroll documentation submitted with the borrower’s application.” Does
that require the lender to replicate each of the borrower’s calculations? 2
Answer: No. Providing an accurate calculation of payroll costs is the responsibility of
the borrower, and the borrower attests to the accuracy of those calculations on the
Borrower Application Form (SBA Form 2483 or SBA Form 2483-C for First Draw PPP
Loans and SBA Form 2483-SD or SBA Form 2483-SD-C for Second Draw PPP Loans).
Lenders are expected to perform a good faith review, in a reasonable time, of the
borrower’s calculations and supporting documents concerning average monthly payroll
cost. For example, minimal review of calculations based on a payroll report by a
recognized third-party payroll processor would be reasonable. In addition, as the PPP
Interim Final Rules indicate, lenders may rely on borrower representations, including
with respect to amounts required to be excluded from payroll costs.
If the lender identifies errors in the borrower’s calculation or material lack of
substantiation in the borrower’s supporting documents, the lender should work with the
borrower to remedy the issue.
1
This document does not carry the force and effect of law independent of the statutes and regulations on which it is
based.
2
Question 1 published April 3, 2020, revised March 3, 2021 to reflect the consolidated interim final rule
implementing updates to the PPP, 86 FR 3692 (Jan. 14, 2021) and the interim final rule for Second Draw PPP
Loans, 86 FR 3712 (Jan. 14, 2021), and revised again on March 12, 2021 to conform to subsection III.1.h. of the
interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
1
As of March 12, 2021
2. Question: Are small business concerns (as defined in section 3 of the Small Business
Act, 15 U.S.C. 632) required to have 500 or fewer employees to be eligible borrowers for
First Draw PPP Loans? 3
Answer: No. Small business concerns can be eligible borrowers for First Draw PPP
Loans even if they have more than 500 employees, as long as they satisfy the existing
statutory and regulatory definition of a “small business concern” under section 3 of the
Small Business Act, 15 U.S.C. 632. A business can qualify if it meets the SBA
employee-based or revenue-based size standard corresponding to its primary industry.
Go to www.sba.gov/size for the industry size standards.
Additionally, a business can qualify for a First Draw PPP Loan as a small business
concern if it met both tests in SBA’s “alternative size standard” as of March 27, 2020: (1)
maximum tangible net worth of the business is not more than $15 million; and (2) the
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.
A business that qualifies as a small business concern under section 3 of the Small
Business Act, 15 U.S.C. 632, may truthfully attest to its eligibility for a First Draw PPP
Loan on the Borrower Application Form, unless otherwise ineligible.
Notwithstanding the foregoing, housing cooperatives, eligible 501(c)(6) organizations,
and eligible destination marketing organizations, are eligible for a First Draw PPP Loan
only if they employ no more than 300 employees. 4
3. Question: Does my business have to qualify as a small business concern (as defined in
section 3 of the Small Business Act, 15 U.S.C. 632) in order to receive a First Draw PPP
Loan? 5
Answer: No. In addition to small business concerns, a business is eligible for a First
Draw PPP Loan if the business has 500 or fewer employees or the business meets the
SBA employee-based or revenue-based size standard for the industry in which it operates
(if applicable). Similarly, First Draw PPP Loans are also available for qualifying tax-
exempt nonprofit organizations described in section 501(c)(3) of the Internal Revenue
Code (IRC), tax-exempt veterans organization described in section 501(c)(19) of the IRC,
3
Question 2 published April 6, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule
implementing updates to the PPP. This FAQ applies only to First Draw PPP Loans. Different eligibility
requirements apply to Second Draw PPP Loans. See FAQ #63 and subsection (c) of the interim final rule for
Second Draw PPP Loans.
4
See subsections B.1.g.v., B.1.g.vii., and B.1.g.viii. of the consolidated interim final rule implementing updates to
the PPP for additional information on the eligibility of housing cooperatives, destination marketing organizations,
and section 501(c)(6) organizations.
5
Question 3 published April 6, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule
implementing updates to the PPP. This FAQ applies only to First Draw PPP Loans. Different eligibility
requirements apply to Second Draw PPP Loans. See FAQ #63 and subsection (c) of the interim final rule for
Second Draw PPP Loans.
2
As of March 12, 2021
Tribal business concerns described in section 31(b)(2)(C) of the Small Business Act, and
eligible nonprofit news organizations 6 that have 500 or fewer employees or meet the
SBA employee-based size standards for the industry in which they operate. First Draw
PPP Loans also are available for housing cooperatives, eligible section 501(c)(6)
organizations, and eligible destination marketing organizations that employ not more than
300 employees.
4. Question: Are lenders required to make an independent determination regarding
applicability of affiliation rules under 13 C.F.R. 121.301(f) to borrowers? 7
Answer: No. It is the responsibility of the borrower to determine which entities (if any)
are its affiliates and determine the employee headcount of the borrower and its affiliates.
Lenders are permitted to rely on borrowers’ certifications.
5. Question: Are borrowers required to apply SBA’s affiliation rules under 13 C.F.R.
121.301(f)? 8
Answer: Yes. Borrowers must apply the affiliation rules, including any applicable
exceptions or affiliation waivers, set forth in SBA’s Interim Final Rule on Affiliation,
Interim Final Rule on Treatment of Entities with Foreign Affiliates, the consolidated
interim final rule implementing updates to the PPP, and the interim final rule for Second
Draw PPP Loans. A borrower must certify on the applicable Borrower Application Form
that the borrower is eligible to receive a PPP loan. For a First Draw PPP Loan, that
certification means that the borrower has no more than 500 employees, is a small
business concern as defined in section 3 of the Small Business Act (15 U.S.C. 632) that
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.
(Notwithstanding the foregoing, housing cooperatives, eligible 501(c)(6) organizations,
and eligible destination marketing organizations, are eligible for a First Draw PPP Loan
only if they employ no more than 300 employees.) For a Second Draw PPP Loan, that
certification means the borrower has no more than 300 employees, after applying the
affiliation rules, if applicable, and the borrower meets the other eligibility requirements in
subsection (c) of the interim final rule for Second Draw PPP Loans. SBA’s existing
affiliation exclusions apply to the PPP, including, for example the exclusions under 13
CFR 121.103(b)(2).
6. Question: The affiliation rule based on ownership (13 C.F.R. 121.301(f)(1)) states that
SBA will deem a minority shareholder in a business to control the business if the
shareholder has the right to prevent a quorum or otherwise block action by the board of
6
See subsection B.1.g.vi. of the consolidated interim final rule implementing updates to the PPP and FAQ #56 for
additional information on the eligibility of nonprofit news organizations.
7
Question 4 published April 6, 2020.
8
Question 5 published April 6, 2020 and revised March 3, 2021 to conform to subsections B.1.g.v., B.1.g.vii., and
B.1.g.viii of the consolidated interim final rule implementing updates to the PPP and subsection (c) of the interim
final rule on Second Draw PPP Loans.
3
As of March 12, 2021
directors or shareholders. If a minority shareholder irrevocably gives up those rights, is it
still considered to be an affiliate of the business? 9
Answer: No. If a minority shareholder in a business irrevocably waives or relinquishes
any existing rights specified in 13 C.F.R. 121.301(f)(1), the minority shareholder would
no longer be an affiliate of the business (assuming no other relationship that triggers the
affiliation rules).
7. Question: Section 7(a)(36)(A)(viii)(II) of the Small Business Act excludes from the
definition of payroll costs any employee compensation in excess of $100,000 on an
annualized basis, as prorated for the period during which the payments are made or the
obligation to make the payments is incurred. Does that exclusion apply to all employee
benefits of monetary value? 10
Answer: No. The exclusion of compensation in excess of $100,000 on an annualized
basis, as prorated for the period during which the payments are made or the obligation to
make the payments is incurred, applies only to cash compensation, not to non-cash
benefits, including:
• employer contributions to defined-benefit or defined-contribution retirement
plans;
• payment for the provision of employee benefits consisting of group health care or
group life, disability, vision, or dental insurance coverage, including insurance
premiums; and
• payment of state and local taxes assessed on compensation of employees.
8. Question: Do PPP loans cover paid sick leave? 11
Answer: Yes. PPP loans cover payroll costs, including costs for employee vacation,
parental, family, medical, and sick leave. However, the CARES Act excludes qualified
sick and family leave wages for which a credit is allowed under sections 7001 and 7003
of the Families First Coronavirus Response Act (Public Law 116–127). Learn more
about the Paid Sick Leave Refundable Credit here.
9. Question: My small business is a seasonal business whose activity increases from April
to June. Considering activity from that period would be a more accurate reflection of my
business’s operations. However, my small business was not fully ramped up on February
15, 2020. Am I still eligible? 12
9
Question 6 published April 6, 2020.
10
Question 7 published April 6, 2020 and revised March 3, 2021 to conform to subsection B.4.h.ii. of the
consolidated interim final rule implementing updates to the PPP.
11
Question 8 published April 6, 2020.
12
Question 9 published April 6, 2020 and revised March 3, 2021 to conform to subsection B.1.e. of the consolidated
interim final rule implementing updates to the PPP.
4
As of March 12, 2021
Answer: In evaluating a borrower’s eligibility, a lender may consider a seasonal
borrower to have been in operation on February 15, 2020 if the business was in operation
for any 12-week period between February 15, 2019 and February 15, 2020.
10. Question: What if an eligible borrower contracts with a third-party payer such as a
payroll provider or a Professional Employer Organization (PEO) to process payroll and
report payroll taxes? 13
Answer: SBA recognizes that eligible borrowers that use PEOs or similar payroll
providers are required under some state registration laws to report wage and other data on
the Employer Identification Number (EIN) of the PEO or other payroll provider. In these
cases, payroll documentation provided by the payroll provider that indicates the amount
of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s
employees will be considered acceptable PPP loan payroll documentation. Relevant
information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941
Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly
Federal Tax Return, should be used if it is available; otherwise, the eligible borrower
should obtain a statement from the payroll provider documenting the amount of wages
and payroll taxes. In addition, employees of the eligible borrower will not be considered
employees of the eligible borrower’s payroll provider or PEO.
11. Question: May lenders accept signatures from a single individual who is authorized to
sign on behalf of the borrower? 14
Answer: Yes. However, the borrower should bear in mind that, as the Borrower
Application Forms indicate, only an authorized representative of the applicant seeking a
loan may sign on behalf of the applicant. An individual’s signature as an “Authorized
Representative of Applicant” is a representation to the lender and to the U.S. government
that the signer is authorized to make the certifications, including with respect to the
applicant and each owner of 20% or more of the applicant’s equity, contained in the
Borrower Application Form. Lenders may rely on that representation and accept a single
individual’s signature on that basis.
12. Question: I need to request a loan to support my small business operations in light of
current economic uncertainty. However, I pleaded guilty to a felony crime a very long
time ago. Am I still eligible for the PPP? 15
Answer: A business is ineligible due to an owner’s criminal history only if an owner of
20 percent or more of the equity of the applicant:
13
Question 10 published April 6, 2020.
14
Question 11 published April 6, 2020 and revised March 3, 2021 to clarify applicability to non-profits.
15
Question 12 published April 6, 2020, revised June 25, 2020, and revised again on March 12, 2021 to conform to
subsection B.2.a.iii. of the consolidated interim final rule implementing updates to the PPP (86 FR 3692, 3698), as
amended by subsection III.2 of the interim final rule on Revisions to Loan Amount Calculation and Eligibility
posted March 3, 2021.
5
As of March 12, 2021
• is presently incarcerated or, for any felony, is presently subject to an indictment,
criminal information, arraignment, or other means by which formal criminal
charges are brought in any jurisdiction; or
• has been convicted of, pleaded guilty or nolo contendere to, or commenced any
form of parole or probation (including probation before judgment) for, a felony
involving fraud, bribery, embezzlement, or a false statement in a loan application
or an application for federal financial assistance within the last five years.
13. Question: Are lenders permitted to use their own online portals and an electronic form
that they create to collect the same information and certifications as in the Borrower
Application Forms, in order to complete implementation of their online portals? 16
Answer: Yes. Lenders may use their own online systems and a form they establish that
asks for the same information (using the same language) as the Borrower Application
Forms. Lenders are still required to send the data to SBA using SBA’s interface.
14. Question: What time period should borrowers use to determine their number of
employees? 17
Answer: Borrowers may use their average employment over the time period used to
calculate their loan amount to determine their number of employees, for the purposes of
applying an employee-based size standard. Alternatively, borrowers may elect to use
SBA’s usual calculation: the average number of employees per pay period in the 12
completed calendar months prior to the date of the loan application (or the average
number of employees for each of the pay periods that the business has been operational,
if it has not been operational for 12 months).
Seasonal businesses must use the average number of employees per pay period during the
12-calendar week period the borrower used to calculate its payroll costs.
15. Question: Should payments that an eligible borrower made to an independent contractor
or sole proprietor be included in calculations of the eligible borrower’s payroll costs? 18
Answer: No. Any amounts that an eligible borrower has paid to an independent
contractor or sole proprietor should be excluded from the eligible business’s payroll
16
Question 13 published April 6, 2020 and revised March 3, 2021 to include multiple Borrower Application Forms.
17
Question 14 published April 6, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule
implementing updates to the PPP and the interim final rule for Second Draw PPP Loans and to make other changes.
First, Question 14 has been revised to remove discussion of how to calculate a borrower’s maximum loan amount
because that question has been addressed in greater detail in the documents “How to Calculate Maximum Loan
Amounts for First Draw PPP Loans and What Documentation to Provide – by Business Type” (link) and “Second
Draw Paycheck Protection Program (PPP) Loans: How to Calculate Revenue Reduction and Maximum Loan
Amounts Including What Documentation to Provide” (link). Second, Question 14 has been revised to clarify how
seasonal employers determine their number of employees.
18
Question 15 published April 6, 2020 and revised March 3, 2021 to incorporate the exception for fishing boat
owners.
6
As of March 12, 2021
costs, except for fishing boat owners as permitted by PPP interim final rules. 19 However,
an independent contractor or sole proprietor will itself be eligible for a loan under the
PPP, if it satisfies the applicable requirements.
16. Question: How should a borrower account for federal taxes when determining its
payroll costs for purposes of the maximum loan amount, allowable uses of a PPP loan,
and the amount of a loan that may be forgiven? 20
Answer: Payroll costs are calculated on a gross basis without regard to (i.e., not
including subtractions or additions based on) federal taxes imposed or withheld, such as
the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and
income taxes required to be withheld from employees. As a result, payroll costs are not
reduced by taxes imposed on an employee and required to be withheld by the employer,
but payroll costs do not include the employer’s share of payroll tax. For example, an
employee who earned $4,000 per month in gross wages, from which $500 in federal taxes
was withheld, would count as $4,000 in payroll costs. The employee would receive
$3,500, and $500 would be paid to the federal government. However, the employer-side
federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs
under the statute. 21
17. Question: I filed or approved a loan application based on the version of the PPP Interim
Final Rules published at the time of the application. Do I need to take any action based
on the updated guidance in these FAQs? 22
Answer: No. Borrowers and lenders may rely on the laws, rules, and guidance available
at the time of the relevant application. However, borrowers whose previously submitted
loan applications have not yet been processed may revise their applications based on
clarifications reflected in these FAQs.
18. Question: Are PPP loans for existing customers considered new accounts for FinCEN
Rule CDD purposes? Are lenders required to collect, certify, or verify beneficial
19
See 85 FR 39066, subsection III.1. (June 30, 2020) and subsection B.4.i. of the consolidated interim final rule
implementing updates to the PPP.
20
Question 16 published April 6, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule
implementing updates to the PPP.
21
The definition of “payroll costs” in the CARES Act, 15 U.S.C. 636(a)(36)(A)(viii), excludes “taxes imposed or
withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period,” defined as
February 15, 2020, to June 30, 2020. As described above, the SBA interprets this statutory exclusion to mean that
payroll costs are calculated on a gross basis, without subtracting federal taxes that are imposed on the employee or
withheld from employee wages. Unlike employer-side payroll taxes, such employee-side taxes are ordinarily
expressed as a reduction in employee take-home pay; their exclusion from the definition of payroll costs means
payroll costs should not be reduced based on taxes imposed on the employee or withheld from employee wages.
This interpretation is consistent with the text of the statute and advances the legislative purpose of ensuring workers
remain paid and employed. Further, because the reference period for determining a borrower’s maximum loan
amount will entirely precede the period during which borrowers will be subject to the restrictions on allowable uses
of the loans, for purposes of the determination of allowable uses of loans and the amount of loan forgiveness, this
statutory exclusion will apply with respect to such taxes imposed or withheld at any time, not only during such
period.
22
Question 17 published April 6, 2020 and revised March 3, 2021 to reflect subsequent rulemaking.
7
As of March 12, 2021
ownership information in accordance with the rule requirements for existing customers? 23
Answer: If the PPP loan is being made to an existing customer and the necessary
information was previously verified, you do not need to re-verify the information.
Furthermore, if federally insured depository institutions and federally insured credit
unions eligible to participate in the PPP program have not yet collected beneficial
ownership information on existing customers, such institutions do not need to collect and
verify beneficial ownership information for those customers applying for new PPP loans,
unless otherwise indicated by the lender’s risk-based approach to BSA compliance.
19. Question: Do lenders have to use a promissory note provided by SBA or may they use
their own? 24
Answer: Lenders may use their own promissory note or an SBA form of promissory
note.
20. Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll
costs over the applicable forgiveness covered period. When does the applicable
forgiveness covered period begin? 25
Answer: The CARES Act provided for an eight-week forgiveness covered period that
starts on the date the lender makes a disbursement of the PPP loan to the borrower. The
lender must disburse the loan no later than 10 calendar days from the date of loan
approval.
The Paycheck Protection Program Flexibility Act of 2020, which became law on June 5,
2020, extended the covered period for loan forgiveness from eight weeks after the date of
loan disbursement to 24 weeks after the date of loan disbursement, providing
substantially greater flexibility for borrowers to qualify for loan forgiveness. The 24-
week period applies to all borrowers that received forgiveness prior to December 27,
2020, but borrowers that received an SBA loan number before June 5, 2020, have the
option to use an eight-week period.
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
(Economic Aid Act), enacted on December 27, 2020, changed the definition of “loan
forgiveness covered period” to the period beginning on the date the lender disburses the
PPP loan and ending on any date selected by the borrower that occurs during the period
(i) beginning on the date that is 8 weeks after the date of disbursement and (ii) ending on
the date that is 24 weeks after the date of disbursement.
23
Question 18 published April 6, 2020. See FAQs #54 and #55 regarding application of these requirements to
Second Draw PPP Loans.
24
Question 19 published April 8, 2020.
25
Question 20 published April 8, 2020 and revised June 25, 2020. This question was further revised on March 3,
2021 to reflect the consolidated interim final rule implementing updates to the PPP.
8
As of March 12, 2021
21. Question: Do lenders need a separate SBA Authorization document to issue PPP
loans? 26
Answer: No. A lender does not need a separate SBA Authorization for SBA to
guarantee a PPP loan. However, lenders must have executed SBA Form 2484 (Lender’s
Application - Paycheck Protection Program Loan Guaranty) or SBA Form 2484-SD
(Lender’s Application - Second Draw Loan Guaranty) 27 to issue PPP loans and receive a
loan number for each originated PPP loan. Lenders may include in their promissory
notes for PPP loans any terms and conditions, including relating to amortization and
disclosure, that are not inconsistent with the CARES Act, the Economic Aid Act, the PPP
Interim Final Rules and guidance, and SBA Form 2484 or SBA Form 2484-SD.
22. Question: I am a non-bank lender that meets all applicable criteria of the PPP Interim
Final Rules. Will I be automatically enrolled as a PPP lender? What criteria will SBA
and the Treasury Department use to assess whether to approve my application to
participate as a PPP lender? 28
Answer: We encourage lenders that are not currently 7(a) lenders to apply in order to
increase the scope of PPP lending options and the speed with which PPP loans can be
disbursed to help small businesses across America. We recognize that financial
technology solutions can promote efficiency and financial inclusion in implementing the
PPP. Applicants should submit SBA Form 3507 and the relevant attachments to
NFRLApplicationForPPP@sba.gov. Submission of the SBA Form 3507 does not result
in automatic enrollment in the PPP. SBA and the Treasury Department will evaluate
each application from a non-bank or non-insured depository institution lender and
determine whether the applicant has the necessary qualifications to process, close,
disburse, and service PPP loans made with SBA’s guarantee. SBA may request
additional information from the applicant before making a determination.
23. Question: How do the $10 million cap (or $2 million cap for a Second Draw PPP Loan)
and affiliation rules work for franchises? 29
Answer: If a franchise brand is listed on the SBA Franchise Directory, each of its
franchisees that meets the applicable size standard can apply for a PPP loan. (The
franchisor does not apply on behalf of its franchisees.) The $10 million cap on First
Draw PPP Loans (or $2 million cap for a Second Draw PPP Loan) is a limit per
26
Question 21 published April 13, 2020 and revised March 3, 2021 to conform to the interim final rule for Second
Draw PPP Loans.
27
This requirement is satisfied by a lender when the lender completes the process of submitting a loan through
SBA’s electronic loan processing system; no transmission or retention of a physical copy of SBA Form 2484 or
SBA 2484-SD is required.
28
Question 22 published April 13, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule
implementing updates to the PPP.
29
Question 23 was published April 13, 2020 and revised March 3, 2021 to reflect the interim final rule for Second
Draw PPP Loans.
9
As of March 12, 2021
franchisee entity, and each franchisee is limited to one First Draw and one Second Draw
PPP Loan.
Franchise brands that have been denied listing on the Directory because of affiliation
between franchisor and franchisee may request listing to receive PPP loans. SBA will
not apply affiliation rules to a franchise brand requesting listing on the Directory to
participate in the PPP, but SBA will confirm that the brand is otherwise eligible for
listing on the Directory.
24. Question: How do the $10 million cap (or $2 million cap for a Second Draw PPP Loan)
and affiliation rules work for hotels and restaurants (and any business assigned a North
American Industry Classification System (NAICS) code beginning with 72)? 30
Answer: Any single business entity that is assigned a NAICS code beginning with 72
(including hotels and restaurants) and that employs not more than 500 employees per
physical location is eligible to receive a First Draw PPP Loan. For Second Draw PPP
Loans, a business that is assigned a NAICS code beginning with 72 may have no more
than 300 employees per physical location and other eligibility criteria must be met. 31
In addition, SBA’s affiliation rules (13 CFR 121.103 and 13 CFR 121.301) do not apply
to any business entity that is assigned a NAICS code beginning with 72 and that employs
not more than a total of 500 employees (or 300 employees for a Second Draw PPP loan).
As a result, if each hotel or restaurant location owned by a parent business is a separate
legal business entity, each hotel or restaurant location that employs not more than 500
employees (or 300 employees for a Second Draw PPP loan) is permitted to apply for a
separate PPP loan provided it uses its unique EIN.
The $10 million (or $2 million for a Second Draw PPP Loan) maximum loan amount
limitation applies to each eligible business entity, because individual business entities
cannot apply for more than one First Draw or Second Draw PPP Loan. The following
examples illustrate how these principles apply.
Example 1. Company X directly owns multiple restaurants and has no affiliates.
• Company X may apply for a First Draw PPP Loan if it employs 500 or fewer
employees per location (including at its headquarters), even if the total number of
employees employed across all locations is over 500.
Example 2. Company X wholly owns Company Y and Company Z (as a result,
Companies X, Y, and Z are all affiliates of one another). Company Y and Company Z
each own a single restaurant with 500 or fewer employees.
• Company Y and Company Z can each apply for a separate First Draw PPP Loan,
because each has 500 or fewer employees. The affiliation rules do not apply,
30
Question 24 was published April 13, 2020 and revised March 3, 2021 to reflect the interim final rule for Second
Draw PPP Loans.
31
See subsection (c) of the interim final rule for Second Draw PPP Loans.
10
As of March 12, 2021
because Company Y and Company Z each has 500 or fewer employees and is in
the food services business (with a NAICS code beginning with 72).
Example 3. Company X wholly owns Company Y and Company Z (as a result,
Companies X, Y, and Z are all affiliates of one another). Company Y owns a restaurant
with 400 employees. Company Z is a construction company with 400 employees.
• Company Y is eligible for a First Draw PPP Loan because it has 500 or fewer
employees. The affiliation rules do not apply to Company Y, because it has 500
or fewer employees and is in the food services business (with a NAICS code
beginning with 72).
• The waiver of the affiliation rules does not apply to Company Z, because
Company Z is in the construction industry. Under SBA’s affiliation rules, 13
CFR 121.301(f)(1) and (3), Company Y and Company Z are affiliates of one
another because they are under the common control of Company X, which wholly
owns both companies. This means that the size of Company Z is determined by
adding its employees to those of Companies X and Y. Therefore, Company Z is
deemed to have more than 500 employees, together with its affiliates. However,
Company Z may be eligible to receive a First Draw PPP Loan as a small business
concern if it, together with Companies X and Y, meets SBA’s other applicable
size standards, as explained in FAQ #2.
25. Question: Does the information lenders are required to collect from PPP applicants
regarding every owner who has a 20% or greater ownership stake in the applicant
business (i.e., owner name, title, ownership %, TIN, and address) satisfy a lender’s
obligation to collect beneficial ownership information (which has a 25% ownership
threshold) under the Bank Secrecy Act? 32
Answer:
For lenders with existing customers: With respect to collecting beneficial ownership
information for owners holding a 20% or greater ownership interest, if the PPP loan is
being made to an existing customer and the lender previously verified the necessary
information, the lender does not need to re-verify the information. Furthermore, if
federally insured depository institutions and federally insured credit unions eligible to
participate in the PPP program have not yet collected such beneficial ownership
information on existing customers, such institutions do not need to collect and verify
beneficial ownership information for those customers applying for new PPP loans, unless
otherwise indicated by the lender’s risk-based approach to Bank Secrecy Act (BSA)
compliance.
For lenders with new customers: For new customers, the lender’s collection of the
following information from all natural persons with a 20% or greater ownership stake in
the applicant business will be deemed to satisfy applicable BSA requirements and
FinCEN regulations governing the collection of beneficial ownership information: owner
name, title, ownership %, TIN, address, and date of birth. If any ownership interest of
32
Question 25 published April 13, 2020. See FAQs #54 and #55 regarding application of these requirements to
Second Draw PPP Loans.
11
As of March 12, 2021
20% or greater in the applicant business belongs to a business or other legal entity,
lenders will need to collect appropriate beneficial ownership information for that entity.
If you have questions about requirements related to beneficial ownership, go to
https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule. Decisions
regarding further verification of beneficial ownership information collected from new
customers should be made pursuant to the lender’s risk-based approach to BSA
compliance.
26. Question: SBA regulations require approval by SBA’s Standards of Conduct Committee
(SCC) for SBA Assistance, other than disaster assistance, to an entity, if its sole
proprietor, partner, officer, director, or stockholder with a 10 percent or more interest is:
a current SBA employee; a Member of Congress; an appointed official or employee of
the legislative or judicial branch; a member or employee of an SBA Advisory Council or
SCORE volunteer; or a household member of any of the preceding individuals. Do these
entities need the approval of the SCC in order to be eligible for a PPP loan? 33
Answer: The SCC previously authorized a blanket approval for PPP loans to such
entities so that further action by the SCC is not necessary in the PPP program. Under the
Economic Aid Act, certain borrowers became ineligible and are prohibited from
receiving a First Draw PPP Loan or Second Draw PPP Loan made after December 27,
2020. If a controlling interest in the borrower (meaning 20 percent by vote or value of
the outstanding amount of any class of equity interest) is held directly or indirectly by the
President of the United States, the Vice President of the United States, the head of an
Executive Department, or a Member of Congress, or the spouse of such person as
determined under applicable common law, the borrower is ineligible for a First Draw PPP
Loan and a Second Draw PPP Loan. In addition, for any First Draw PPP Loan made
before December 27, 2020, if the President of the United States, Vice President of the
United States, the head of an Executive department, or a Member of Congress, or the
spouse of any such person as determined under applicable common law, directly or
indirectly held a controlling interest in the borrower on the date the loan application was
submitted to the PPP lender, the borrower is required to disclose such interests to SBA on
SBA Form 3508D and submit the form to the PPP lender following submission of the
borrower’s application for loan forgiveness, as specified in subsection 6.c. of the
consolidated interim final rule on loan forgiveness requirements and loan review
procedures as amended by the Economic Aid Act.
27. Question: SBA regulations require a written statement of no objection by the pertinent
Department or military service before it provides any SBA Assistance, other than disaster
loans, to an entity, if its sole proprietor, partner, officer, director, or stockholder with a 10
percent or more interest, or if a household member of any of the preceding individuals, is
33
Question 26 published April 14, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule
implementing updates to the PPP, the interim final rule for Second Draw PPP Loans, and the consolidated interim
final rule on loan forgiveness requirements and loan review procedures as amended by Economic Aid Act, 86 FR
8283 (Feb. 5, 2021) (“consolidated interim final rule on loan forgiveness and loan review procedures”).
12
As of March 12, 2021
an employee of another Government Department or Agency having a grade of at least
GS-13 or its equivalent. Does this requirement apply to PPP loans? 34
Answer: No. The SCC has determined that a written statement of no objection is not
required from another Government Department or Agency for PPP loans. However, see
FAQ #26 for information for a borrower with a controlling interest (meaning 20 percent
by vote or value of the outstanding amount of any class of equity interest) that is held
directly or indirectly by the head of an Executive Department or the spouse of such
person as determined under applicable common law.
28. Question: Is a lender permitted to submit a PPP loan application to SBA through SBA’s
electronic loan processing system before the lender has fulfilled its responsibility to
review the required borrower documentation and calculation of payroll costs, and for
Second Draw PPP Loans, review the required borrower documentation regarding revenue
reduction? 35
Answer: No. Before a lender submits a PPP loan through SBA’s electronic loan
processing system, the lender must have collected the information and certifications
contained in the Borrower Application Form (SBA Form 2483, SBA Form 2483-C, SBA
Form 2483-SD, or SBA Form 2483-SD-C) and the lender must have fulfilled its
obligations set forth in paragraphs 3.b.(i)-(iii) of the first PPP Interim Final Rule,
subsection C.3. of the consolidated interim final rule implementing updates to the PPP, or
subsection (h)(2)(i) of the interim final rule for Second Draw PPP Loans, as
applicable. Please refer to the Interim Final Rules and FAQ #1 for more information on
the lender’s responsibility regarding confirmation of payroll costs, and the interim final
rule for Second Draw PPP Loans for the lender’s responsibility regarding confirmation of
revenue reduction.
Lenders who made PPP loans prior to April 14, 2020 and did not understand that these
steps are required before submission into E-Tran did not need to withdraw applications
submitted to E-Tran before April 14, 2020, but must have fulfilled lender responsibilities
with respect to those applications as soon as practicable and no later than loan closing.
29. Question: Can lenders use scanned copies of documents or E-signatures or E-consents
permitted by the E-sign Act? 36
34
Question 27 published April 14, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule
implementing updates to the PPP, the interim final rule for Second Draw PPP Loans, and the consolidated interim
final rule on loan forgiveness and loan review procedures.
35
Question 28 published April 14, 2020, revised March 3, 2021 to conform to the consolidated interim final rule
implementing updates to the PPP and the interim final rule for Second Draw PPP Loans, and revised again
March 12, 2021 to conform to subsection III.1.h. of the interim final rule on Revisions to Loan Amount Calculation
and Eligibility posted March 3, 2021.
36
Question 29 published April 15, 2020, revised March 3, 2021 to reflect the additional SBA forms for Second
Draw PPP Loans and loan forgiveness and revised again on March 12, 2021 to conform to subsection III.1.h. of the
interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
13
As of March 12, 2021
Answer: Yes. All PPP lenders may accept scanned copies of signed loan applications,
loan forgiveness applications, and documents containing the information and
certifications required by SBA Forms 2483, 2483-C, 2483-SD, 2483-SD-C, 3508,
3508EZ, 3508S, or 3508D, and the promissory note used for the PPP loan. Additionally,
lenders may also accept any form of E-consent or E-signature that complies with the
requirements of the Electronic Signatures in Global and National Commerce Act (P.L.
106-229).
If electronic signatures are not feasible, when obtaining a wet ink signature without in-
person contact, lenders should take appropriate steps to ensure the proper party has
executed the document.
This guidance does not supersede signature requirements imposed by other applicable
law, including by the lender’s primary federal regulator.
30. Question: Can a lender sell a PPP loan into the secondary market? 37
Answer: Yes. A PPP loan may be sold into the secondary market at any time after the
loan is fully disbursed. A secondary market sale of a PPP loan does not require SBA
approval. A PPP loan sold into the secondary market is 100% SBA guaranteed. A PPP
loan may be sold on the secondary market at a premium or a discount to par value.
31. Question: Do businesses owned by large companies with adequate sources of liquidity
to support the business’s ongoing operations qualify for a PPP loan? 38
Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all
borrowers must assess their economic need for a PPP loan under the standard established
by the CARES Act and the PPP regulations at the time of the loan application. Although
the CARES Act suspends the ordinary requirement that borrowers must be unable to
obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers
still must certify in good faith that their PPP loan request is necessary. Specifically,
before submitting a PPP application, all borrowers should review carefully the required
certification that “[c]urrent economic uncertainty makes this loan request necessary to
support the ongoing operations of the Applicant.” Borrowers must make this certification
in good faith, taking into account their current business activity and their ability to access
other sources of liquidity sufficient to support their ongoing operations in a manner that is
not significantly detrimental to the business. For example, it is unlikely that a public
company with substantial market value and access to capital markets will be able to make
the required certification in good faith, and such a company should be prepared to
demonstrate to SBA, upon request, the basis for its certification. 39
37
Question 30 published April 17, 2020.
38
Question 31 published April 23, 2020 and revised March 3, 2021 to reflect subsequent PPP guidance and the
interim final rule implementing updates to the PPP and the interim final rule for Second Draw PPP Loans.
39
Section 342 of the Economic Aid Act prohibits public companies from receiving a PPP loan after December 27,
2020.
14
As of March 12, 2021
Lenders may rely on a borrower’s certification regarding the necessity of the loan
request. Any borrower that applied for a PPP loan prior to the issuance of this guidance
and repaid the loan in full by May 18, 2020 will be deemed by SBA to have made the
required certification in good faith.
32. Question: Does the cost of a housing stipend or allowance provided to an employee as
part of compensation count toward payroll costs? 40
Answer: Yes. Payroll costs includes all cash compensation paid to employees, subject to
the $100,000 annual compensation per employee limitation.
33. Question: Is there existing guidance to help PPP applicants and lenders determine
whether an individual employee’s principal place of residence is in the United States? 41
Answer: PPP applicants and lenders may consider IRS regulations (26 CFR § 1.121-
1(b)(2)) when determining whether an individual employee’s principal place of residence
is in the United States.
34. Question: Are agricultural producers, farmers, and ranchers eligible for PPP loans? 42
Answer: Yes. Agricultural producers, farmers, and ranchers are eligible for First Draw
PPP loans if: (i) the business has 500 or fewer employees, or (ii) the business fits within
the applicable revenue-based sized standard under 13 C.F.R. 121.201.
Additionally, agricultural producers, farmers, and ranchers can qualify for First Draw
PPP Loans as a small business concern if their business meets SBA’s “alternative size
standard.” The “alternative size standard” is currently: (1) maximum net worth of the
business is not more than $15 million, and (2) the 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.
Agricultural producers, farmers and ranchers are eligible for a Second Draw PPP Loan if
they have 300 or fewer employees and meet the other eligibility criteria in subsection (c)
of the interim final rule for Second Draw PPP Loans.
For all of these criteria, the applicant must include its affiliates in its calculations. See
FAQ #5.
35. Question: Are agricultural and other forms of cooperatives eligible to receive PPP
loans? 43
40
Question 32 published April 24, 2020.
41
Question 33 published April 24, 2020.
42
Question 34 published April 24, 2020 and revised March 3, 2021 to conform to the interim final rule for Second
Draw PPP Loans.
43
Question 35 published April 24, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule
providing updates to the PPP and the interim final rule for Second Draw PPP Loans.
15
As of March 12, 2021
Answer: As long as other PPP eligibility requirements are met, small agricultural
cooperatives and other cooperatives may receive PPP loans. The Economic Aid Act
added housing cooperatives (as defined in section 216(b) of the Internal Revenue
Code of 1986) that employ not more than 300 employees to the entities eligible for First
Draw PPP Loans and Second Draw PPP Loans.
36. Question: To determine borrower eligibility under the 500-employee or other applicable
threshold for First Draw PPP Loans, or the 300-employee threshold for Second Draw
PPP Loans established by the Economic Aid Act, must a borrower count all employees or
only full-time equivalent employees? 44
Answer: For purposes of loan eligibility, the CARES Act defines the term employee to
include “individuals employed on a full-time, part-time, or other basis.” A borrower
must therefore calculate the total number of employees, including part-time employees,
when determining their employee headcount for purposes of the eligibility threshold. For
example, if a borrower has 200 full-time employees and 50 part-time employees each
working 10 hours per week, the borrower has a total of 250 employees.
By contrast, for purposes of loan forgiveness, the CARES Act uses the standard of “full-
time equivalent employees” to determine the extent to which the loan forgiveness amount
will be reduced in the event of workforce reductions.
37. Question: Do businesses owned by private companies with adequate sources of liquidity
to support the business’s ongoing operations qualify for a PPP loan? 45
Answer: See response to FAQ #31.
38. Question: Section 1102 of the CARES Act provides that PPP loans are available only to
applicants that were “in operation on February 15, 2020.” Is a business that was in
operation on February 15, 2020 but had a change in ownership after February 15, 2020
eligible for a PPP loan? 46
Answer: Yes. As long as the business was in operation on February 15, 2020, if it meets
the other eligibility criteria, the business is eligible to apply for a PPP loan regardless of
the change in ownership. In addition, where there is a change in ownership effectuated
through a purchase of substantially all assets of a business that was in operation on
February 15, the business acquiring the assets will be eligible to apply for a PPP loan
even if the change in ownership results in the assignment of a new tax ID number and
even if the acquiring business was not in operation until after February 15, 2020. If the
acquiring business has maintained the operations of the pre-sale business, the acquiring
business may rely on the historic payroll costs and headcount of the pre-sale business for
44
Question 36 published April 26, 2020 and revised March 3, 2021 to reflect the interim final rule for Second Draw
PPP Loans.
45
Question 37 published April 28, 2020.
46
Question 38 published April 29, 2020.
16
As of March 12, 2021
the purposes of its PPP application, except where the pre-sale business had applied for
and received a PPP loan. The Administrator, in consultation with the Secretary, has
determined that the requirement that a business “was in operation on February 15, 2020”
should be applied based on the economic realities of the business’s operations.
39. Question: Will SBA review individual PPP loan files? 47
Answer: Yes. In FAQ #31, SBA reminded all borrowers of an important certification
required to obtain a PPP loan. To further ensure PPP loans are limited to eligible
borrowers in need, the SBA has decided, in consultation with the Department of the
Treasury, that it will review all loans in excess of $2 million, in addition to other loans as
appropriate, following the lender’s submission of the borrower’s loan forgiveness
application. Additional guidance implementing this procedure has been provided in
subsequent FAQs and the consolidated interim final rule on loan forgiveness and loan
review procedures.
The outcome of SBA’s review of loan files will not affect SBA’s guarantee of any loan
for which the lender complied with the lender obligations set forth in paragraphs
III.3.b(i)-(iii) of the first PPP Interim Final Rule, subsection C.3. of the consolidated
interim final rule implementing updates to the PPP, or subsection (h)(2)(i) of the interim
final rule for Second Draw PPP Loans, as applicable, and further explained in FAQ #1.
40. Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of
the CARES Act (codified as section 7A of the Small Business Act) and SBA’s
implementing rules and guidance) be reduced if the borrower laid off an employee,
offered to rehire the same employee, but the employee declined the offer? 48
Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under
Section 1106(d)(6) of the CARES Act (codified as section 7A(d)(6) of the Small
Business Act) to prescribe regulations granting de minimis exemptions from the CARES
Act’s limits on loan forgiveness, SBA and Treasury issued an interim final rule excluding
laid-off employees whom the borrower offered to rehire (for the same salary/wages and
same number of hours) from the CARES Act’s loan forgiveness reduction
calculation. 49 The interim final rule specifies that, to qualify for this exception, the
borrower must have made a good faith, written offer of rehire, and the employee’s
rejection of that offer must be documented by the borrower. Employees and employers
should be aware that employees who reject offers of re-employment may forfeit
eligibility for continued unemployment compensation.
47
Question 39 published April 29, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule
implementing updates to the PPP, the interim final rule for Second Draw PPP Loans, and the consolidated interim
final rule on loan forgiveness and loan review procedures.
48
Question 40 published May 3, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule
providing updates to the PPP, the interim final rule on Second Draw PPP Loans, and the consolidated interim final
rule on loan forgiveness and loan review procedures.
49
See 85 FR 33004, 33007 (June 1, 2020) and subsection IV.5.a. of the consolidated interim final rule on loan
forgiveness and loan review procedures.
17
As of March 12, 2021
41. Question: Can a seasonal employer that received a First Draw PPP Loan in 2020 and
elected to use a 12-week period between May 1, 2019 and September 15, 2019 to
calculate its maximum PPP loan amount under the interim final rule issued by Treasury
on April 27, 2020, make all the required certifications on the Borrower Application
Form? 50
Answer: Yes. The 2020 First Draw PPP Loan Borrower Application Form required
applicants to certify that “The Applicant is eligible to receive a loan under the rules in
effect at the time this application is submitted that have been issued by the Small
Business Administration (SBA) implementing the Paycheck Protection Program.” On
April 27, 2020, Treasury issued an interim final rule allowing seasonal borrowers to use
an alternative base period for purposes of calculating the loan amount for which they are
eligible under the PPP. For First Draw PPP Loans made before December 27, 2020, an
applicant that was otherwise in compliance with applicable SBA requirements, and that
complied with Treasury’s interim final rule on seasonal workers, will be deemed eligible
for a PPP loan under SBA rules. Instead of following the instructions on page 3 of the
Borrower Application Form (April 2, 2020 version) for the time period for calculating
average monthly payroll for seasonal businesses, an applicant may have elected to use the
time period in Treasury’s interim final rule on seasonal workers.
42. Question: Do nonprofit hospitals exempt from taxation under section 115 of the Internal
Revenue Code qualify as “nonprofit organizations” under section 1102 of the CARES
Act? 51
Answer: Section 1102 of the CARES Act defines the term “nonprofit organization” as
“an organization that is described in section 501(c)(3) of the Internal Revenue Code of
1986 and that is exempt from taxation under section 501(a) of such Code.” The
Administrator, in consultation with the Secretary of the Treasury, understands that
nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code
are unique in that many such hospitals may meet the description set forth in section
501(c)(3) of the Internal Revenue Code to qualify for tax exemption under section 501(a),
but have not sought to be recognized by the IRS as such because they are otherwise fully
tax-exempt under a different provision of the Internal Revenue Code.
Accordingly, the Administrator will treat a nonprofit hospital exempt from taxation under
section 115 of the Internal Revenue Code as meeting the definition of “nonprofit
organization” under section 1102 of the CARES Act if the hospital reasonably
determines, in a written record maintained by the hospital, that it is an organization
50
Question 41 published May 3, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule
implementing updates to the PPP. This FAQ applies only to First Draw PPP Loans made before December 27,
2020. Seasonal employers that receive a PPP loan in 2021 must calculate payroll costs using average monthly
payroll for any 12-week period between February 15, 2019 and February 15, 2020. See “How to Calculate
Maximum Loan Amounts for First Draw PPP Loans and What Documentation to Provide – by Business Type”
(link) and “Second Draw Paycheck Protection Program (PPP) Loans: How to Calculate Revenue Reduction and
Maximum Loan Amounts Including What Documentation to Provide” (link).
51
Question 42 published May 3, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule
implementing updates to the PPP.
18
As of March 12, 2021
described in section 501(c)(3) of the Internal Revenue Code and is therefore within a
category of organization that is exempt from taxation under section 501(a). 52 The
hospital’s certification of eligibility on the Borrower Application Form cannot be made
without this determination. This approach helps accomplish the statutory purpose of
ensuring that a broad range of borrowers, including entities that are helping to lead the
medical response to the ongoing pandemic, can benefit from the loans provided under the
PPP.
This guidance is solely for purposes of qualification as a “nonprofit organization” under
section 1102 of the CARES Act and related purposes of the CARES Act, and does not
have any consequences for federal tax law purposes. Nonprofit hospitals should also
review all other applicable eligibility criteria, including an important limitation on
ownership by state or local governments. 53
43. Question: FAQ #31 reminded borrowers to review carefully the required certification on
the Borrower Application Form that “[c]urrent economic uncertainty makes this loan
request necessary to support the ongoing operations of the Applicant.” SBA guidance
and regulations provide that any borrower who applied for a PPP loan prior to April 24,
2020 and repaid the loan in full by May 7, 2020 will be deemed by SBA to have made the
required certification in good faith. Is it possible for a borrower to obtain an extension of
the May 7, 2020 repayment date? 54
Answer: SBA extended the repayment date for this safe harbor to May 14, 2020 and
subsequently extended it again to May 18, 2020. See FAQ #47. Borrowers did not need
to apply for the extensions. The extensions were implemented through revisions to the
SBA’s interim final rule providing the safe harbor. See FAQ #46 for additional guidance
on how SBA will review the certification.
44. Question: How do SBA’s affiliation rules at 13 C.F.R. 121.301(f) apply with regard to
counting the employees of foreign and U.S. affiliates? 55
Answer: For purposes of the PPP’s 500 or fewer employee size standard (or 300
employee size standard for Second Draw PPP Loans and certain entities for First Draw
PPP Loans), an applicant must count all of its employees and the employees of its U.S
and foreign affiliates, absent a waiver of or an exception to the affiliation rules. 13
52
This determination need not account for the ancillary conditions set forth in section 501(r) of the Internal Revenue
Code and elsewhere associated with securing the tax exemption under that section. Section 501(r) states that a
hospital organization shall not be treated as described in section 501(c)(3) unless it meets certain community health
and other requirements. However, section 1102 of the CARES Act defines the term “nonprofit organization” solely
by reference to section 501(c)(3), and section 501(r) does not amend section 501(c)(3). Therefore, for purposes of
the PPP, the requirements of section 501(r) do not apply to the determination of whether an organization is
“described in section 501(c)(3).”
53
See 85 FR 23450, 23451 (April 28, 2020) and the consolidated interim final rule implementing updates to the
PPP.
54
Question 43 published May 5, 2020 and revised March 3, 2021 to reflect subsequent SBA interim final rules at 85
FR 29845 (May 19, 2020) and 85 FR 31357 (May 26, 2020).
55
Question 44 published May 5, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule
implementing updates to the PPP and the interim final rule for Second Draw PPP Loans.
19
As of March 12, 2021
C.F.R. 121.301(f)(6). Business concerns seeking to qualify for a First Draw PPP Loan as
a “small business concern” under section 3 of the Small Business Act (15 U.S.C. 632) on
the basis of the employee-based size standard must do the same.
45. Question: Is an employer that repays its PPP loan by the safe harbor deadline (May 18,
2020) eligible for the Employee Retention Credit? 56
Answer: This question is no longer applicable because, as a result of a change in the law
in December 2020, receipt of a PPP loan no longer makes an employer ineligible for the
Employee Retention Credit. See FAQ #65 for updated information related to the
Employee Retention Credit.
46. Question: How will SBA review borrowers’ required good-faith certification concerning
the necessity of their loan request? 57
Answer: When submitting a PPP application, all borrowers must certify in good faith
that “[c]urrent economic uncertainty makes this loan request necessary to support the
ongoing operations of the Applicant.” SBA, in consultation with the Department of the
Treasury, has determined that the following safe harbor will apply to SBA’s review of
First Draw PPP Loans with respect to this issue: Any borrower that, together with its
affiliates, 58 received First Draw PPP Loans with an original principal amount of less than
$2 million will be deemed to have made the required certification concerning the
necessity of the First Draw PPP Loan request in good faith.
SBA has determined that this safe harbor is appropriate because borrowers with First
Draw PPP Loans below this threshold are generally less likely to have had access to
adequate sources of liquidity in the current economic environment than borrowers that
obtained larger loans. This safe harbor will also promote economic certainty as PPP
borrowers with more limited resources endeavor to retain and rehire employees. In
addition, given the large volume of PPP loans, this approach will enable SBA to conserve
its finite audit resources and focus its reviews on larger loans, where the compliance
effort may yield higher returns.
However, this safe harbor will not apply to Schedule C filers that elect to use gross
income to calculate their loan amount on a First Draw PPP Loan if they report more than
$150,000 in gross income on the Schedule C that was used to calculate the borrower’s
loan amount. SBA is eliminating the loan necessity safe harbor for these borrowers as
they may be more likely to have other available sources of liquidity to support their
business’s operations than Schedule C filers with lower levels of gross income.
56
Question 45 published May 6, 2020 and revised May 27, 2020 to change the date from “(May 14, 2020)” to
“(May 18, 2020).”
57
Question 46 published May 13, 2020, revised March 3, 2021 to reflect the interim final rule for Second Draw PPP
Loans, and revised again on March 12, 2021 to reflect the interim final rule on Revisions to Loan Amount
Calculation and Eligibility posted March 3, 2021.
58
For purposes of this safe harbor, a borrower must include its affiliates to the extent required under the interim final
rule on affiliates, 85 FR 20817 (April 15, 2020).
20
As of March 12, 2021
Importantly, borrowers with First Draw PPP Loans greater than $2 million that do not
satisfy this safe harbor and borrowers that elect to use gross income to calculate their
First Draw PPP Loan amount and report more than $150,000 in gross income may still
have an adequate basis for making the required good-faith certification, based on their
individual circumstances in light of the language of the certification and SBA
guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other
PPP loans as appropriate, will be subject to review by SBA for compliance with program
requirements set forth in the PPP Interim Final Rules and in the Borrower Application
Form. If SBA determines in the course of its review that a borrower lacked an adequate
basis for the required certification concerning the necessity of the loan request, SBA will
seek repayment of the outstanding First Draw PPP Loan balance and will inform the
lender that the borrower is not eligible for loan forgiveness. If the borrower repays the
First Draw PPP Loan after receiving notification from SBA, SBA will not pursue
administrative enforcement or referrals to other agencies based on its determination with
respect to the certification concerning necessity of the loan request. SBA’s determination
concerning the certification regarding the necessity of the loan request will not affect
SBA’s loan guarantee.
For Second Draw PPP Loans, all borrowers must certify in good faith that “[c]urrent
economic uncertainty makes this loan request necessary to support the ongoing
operations of the Applicant.” Because Second Draw PPP Loan borrowers must
demonstrate that they have had a 25% reduction in gross revenues, all Second Draw PPP
Loan borrowers will be deemed to have made the required certification concerning the
necessity of the loan in good faith. The loan amounts received by borrowers for First
Draw PPP Loans and Second Draw PPP Loans will not be aggregated.
47. Question: An SBA interim final rule posted on May 8, 2020 provided that any borrower
who applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed
by SBA to have made the required certification concerning the necessity of the loan
request in good faith. Is it possible for a borrower to obtain an extension of the May 14,
2020 repayment date? 59
Answer: Yes, SBA extended the repayment date for this safe harbor to May 18, 2020, to
give borrowers an opportunity to review and consider FAQ #46. Borrowers did not need
to apply for this extension. This extension was implemented through a revision to the
SBA’s interim final rule providing the safe harbor.
48. Question: By when must a lender electronically submit an SBA Form 1502 indicating
that PPP loan funds have been disbursed? 60
Answer: SBA has made available a specific SBA Form 1502 reporting process through
which PPP lenders report on PPP loans and collect the processing fee on fully disbursed
59
Question 47 published May 13, 2020 and revised March 3, 2021 to reflect subsequent SBA interim final rules.
60
Question 48 published May 19, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule
implementing updates to the PPP.
21
As of March 12, 2021
loans to which they are entitled. Lenders must electronically upload SBA Form 1502
information within 20 calendar days after a PPP loan is approved.
49. Question: What is the maturity date of a PPP loan? 61
Answer: If a PPP loan received an SBA loan number on or after June 5, 2020, the loan
has a five-year maturity. If a PPP loan received an SBA loan number before June 5,
2020, the loan has a two-year maturity, unless the borrower and lender mutually agree to
extend the term of the loan to five years. The promissory note for the PPP loan will state
the term of the loan.
50. Question: What effect does the payment or nonpayment of fees of an agent or other
third party have on SBA’s guarantee of a PPP loan or SBA’s payment of fees to
lenders? 62
Answer: The payment or nonpayment of fees of an agent or other third party is not
material to SBA’s guarantee of a PPP loan or to SBA’s payment of fees to lenders.
Additional information about such fees can be found in subsection D.4 of the
consolidated interim final rule implementing updates to the Paycheck Protection
Program.
51. Question: Do payments required for the provision of group health care benefits,
including insurance premiums, include vision and dental benefits? 63
Answer: Yes. Section 308 of the Economic Aid Act specifies that payroll costs include
employer contributions for group life, disability, vision, and dental insurance benefits.
52. Question: The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act)
extended the deferral period for borrower payments of principal, interest, and fees on all
PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the
lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of
the borrower’s loan forgiveness covered period). Previously, the deferral period could
end after 6 months. Are lenders and borrowers required to modify promissory notes used
for PPP loans to reflect the extended deferral period? 64
Answer: The extension of the deferral period under the Flexibility Act automatically
applies to all PPP loans. Lenders are required to give immediate effect to the statutory
extension and should notify borrowers of the change to the deferral period. SBA does not
require a formal modification to the promissory note. A modification of a promissory
61
Question 49 published June 25, 2020.
62
Question 50 published August 11, 2020 and revised March 3, 2021 to conform to the consolidated interim final
rule implementing updates to the PPP.
63
Question 51 published August 11, 2020 and revised March 3, 2021 to reflect subsection B.11.a.ii of the
consolidated interim final rule implementing updates to the PPP.
64
Question 52 published October 7, 2020.
22
As of March 12, 2021
note to reflect the required statutory deferral period under the Flexibility Act will have no
effect on the SBA’s guarantee of a PPP loan.
53. Question: Why are some PPP borrowers receiving a Loan Necessity Questionnaire
(SBA Form 3509 or 3510)? 65
Answer: As previously announced, SBA is reviewing all First Draw PPP Loans of $2
million or more, and other loans as appropriate, for eligibility, fraud or abuse, and
compliance with loan forgiveness requirements. As part of this process, SBA is
providing a Loan Necessity Questionnaire to lenders for them to provide to PPP
borrowers that, together with their affiliates, received First Draw PPP Loans of $2 million
or more. 66 Upon request from their lender, borrowers should return the completed
questionnaire to their lender within 10 business days of receipt.
The information that borrowers provide on the questionnaire will help SBA assess those
borrowers’ certification in their First Draw PPP Loan application that “[c]urrent
economic uncertainty makes this loan request necessary to support the ongoing
operations of the Applicant,” as required by the CARES Act.
A request to complete the Loan Necessity Questionnaire does not mean that SBA is
challenging a borrower’s certification that is required by the CARES Act. SBA’s
assessment of a borrower’s certification will be based on the totality of the borrower’s
circumstances through a multi-factor analysis. As described in FAQ #46, SBA will
assess whether the borrower had adequate basis for making the required good-faith
certification, based on its individual circumstances in light of the language of the
certification and SBA guidance. This certification is required to have been made in good
faith at the time of the First Draw PPP Loan application, even if subsequent
developments resulted in the loan no longer being necessary. In its review, SBA may
take into account the borrower’s circumstances and actions both before and after the
borrower’s certification to the extent that doing so will assist SBA in determining
whether the borrower made the statutorily required certification in good faith at the time
of its First Draw PPP Loan application.
After a borrower submits its completed questionnaire, SBA may request additional
information, if necessary, to complete its review. When additional information is
requested, borrowers will have an opportunity to provide a narrative response to SBA
explaining the circumstances that provided the basis for their good-faith loan necessity
certification. SBA will make a final determination that a borrower lacked an adequate
basis for its loan necessity certification after reviewing any additional information that a
borrower chooses to submit. This targeted, multi-step approach will ensure the integrity
of the evaluation process and expeditious processing, as well as properly allocate SBA’s
finite resources to those First Draw PPP Loans that require additional review.
65
Question 53 published December 9, 2020 and revised March 3, 2021 to reflect additional guidance.
66
See 85 FR 20817 (April 15, 2020) regarding application of SBA’s affiliation rules.
23
As of March 12, 2021
See FAQ #46 for guidance on the loan necessity certification on Second Draw PPP
Loans.
54. Question: Are FinCEN’s April 2020 Frequently Asked Questions regarding the
Paycheck Protection Program (PPP) applicable to Second Draw PPP Loans? 67
Answer: Yes. The FinCEN April 2020 PPP Frequently Asked Questions (FAQs) apply
to Second Draw PPP Loans. If you have general questions about requirements related to
customer due diligence or beneficial ownership, please see
https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule.
55. Question: For purposes of Bank Secrecy Act/Anti-Money Laundering compliance, can a
PPP lender rely on the same information received from a borrower for the purposes of a
First Draw PPP Loan for a Second Draw PPP Loan to that same borrower? 68
Answer: The information a lender obtained from a borrower in connection with a First
Draw PPP Loan can be relied upon by that lender for a Second Draw PPP Loan
application, if the borrower is an existing customer. Decisions regarding the updating of
customer due diligence and the verification and updating of the beneficial ownership
information collected from customers should be made consistent with the guidance for
both existing customers and new customers set forth in the previous April 2020 FAQs
and in this FAQ, and pursuant to the lender’s risk-based approach to Bank Secrecy Act
compliance.
56. Question: How does the 500-employee limit for First Draw PPP Loans and the 300-
employee limit for Second Draw PPP Loans apply to a public broadcasting station if a
college or university operates or holds the license for the station and the station is not a
separate legal entity? 69
Answer: Subsection B.1.g.vi of the consolidated interim final rule implementing updates
to the PPP, 86 FR 3692 (Jan. 14, 2021), and subsection (c)(4) of the interim final rule for
Second Draw PPP Loans, 86 FR 3712 (Jan. 14. 2021), apply the 500- and 300-employee
limits, respectively, based on the number of employees “per location” of the public
broadcasting station. This limit on the number of employees per location applies to the
public broadcasting station itself and does not include other employees of a college or
university that operates or holds the license for the station.
57. Question: When determining the eligibility of section 501(c)(6) organizations and
destination marketing organizations for First Draw PPP Loans and Second Draw PPP
Loans, how is “lobbying activities” defined? 70
67
Question 54 published January 29, 2021.
68
Question 55 published January 29, 2021.
69
Question 56 published January 29, 2021.
70
Questions 57-65 published March 3, 2021.
24
As of March 12, 2021
Answer: For purposes of determining the eligibility of section 501(c)(6) organizations
and destination marketing organizations for First Draw and Second Draw PPP Loans,
“lobbying activities” is defined in section 3 of the Lobbying Disclosure Act of 1995 (2
U.S.C. 1602).
58. Question: May First Draw PPP Loan or Second Draw PPP Loan proceeds be used for
lobbying activities or expenditures?
Answer: No. None of the proceeds of a First Draw PPP Loan or Second Draw PPP
Loan may be used for (1) lobbying activities, as defined in section 3 of the Lobbying
Disclosure Act of 1995 (2 U.S.C. 1602); (2) lobbying expenditures related to a State or
local election; or (3) expenditures designed to influence the enactment of legislation,
appropriations, regulation, administrative action, or Executive order proposed or pending
before Congress or any State government, State legislature, or local legislature or
legislative body.
59. Question: If a borrower that was eligible for a First Draw PPP Loan files for bankruptcy
protection after disbursement of the First Draw PPP Loan, is that borrower eligible for
loan forgiveness of its First Draw PPP Loan?
Answer: Yes. If a borrower that was eligible for a First Draw PPP Loan files for
bankruptcy protection after disbursement of the First Draw PPP Loan, that borrower is
eligible for loan forgiveness, provided it meets all requirements for loan forgiveness set
forth in the PPP Interim Final Rules, including but not limited to, loan proceeds are used
only for eligible expenses and at least 60% of the loan proceeds is used for eligible
payroll costs.
60. Question: If a borrower that was eligible for a First Draw PPP Loan files for bankruptcy
protection after disbursement of the First Draw PPP Loan, is that borrower eligible to
apply for a Second Draw PPP Loan? 71
Answer: No. Each applicant for a Second Draw PPP Loan must certify on the Second
Draw Borrower Application Form (SBA Form 2483-SD or SBA Form 2483-SD-C) that
the applicant and any owner of 20% or more of the applicant is not presently involved in
a bankruptcy proceeding. Thus, a borrower that received a First Draw PPP Loan and
files for bankruptcy protection after disbursement of the First Draw PPP Loan is not
eligible to apply for a Second Draw PPP Loan.
61. Question: To be eligible for a Second Draw PPP Loan, a borrower must certify on SBA
Form 2483-SD or SBA Form 2483-SD-C that, before the Second Draw PPP Loan is
disbursed, the borrower will have used the full loan amount (including any increase) of
its First Draw PPP Loan “only for eligible expenses.” How does the separate
71
Question 60 published March 3, 2021 and revised on March 12, 2021 to conform to subsection III.1.h. of the
interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
25
As of March 12, 2021
requirement that the borrower must use at least 60% of the First Draw PPP Loan
proceeds for payroll costs affect this certification? 72
Answer: The borrower may certify, for purposes of the Second Draw PPP Loan
application, that it will have used all of its First Draw PPP Loan proceeds “only for
eligible expenses” if the borrower has used or will use the First Draw PPP Loan proceeds
for any or all of the eligible expenses outlined in subsection B.11.a.i.-xi of the
consolidated interim final rule implementing updates to the PPP. Borrowers should be
mindful that failure to use PPP loan proceeds for the required percentage of payroll costs
will affect loan forgiveness.
62. Question: If a borrower received partial forgiveness of its First Draw PPP Loan, does
this make the borrower ineligible for a Second Draw PPP Loan?
Answer: If a borrower received partial forgiveness of its First Draw PPP Loan, the
borrower is eligible for a Second Draw PPP Loan as long as the borrower used the full
amount of its First Draw PPP Loan only for eligible expenses outlined in subsection
B.11.a.i.-xi of the consolidated interim final rule implementing updates to the PPP.
63. Question: May applicants use SBA’s established size standards (either revenue-based or
employee-based) or SBA’s alternative size standard to qualify for a Second Draw PPP
Loan?
Answer: No. Applicants may not use SBA’s established size standards (either revenue-
based or employee-based) or the alternative size standard to qualify for a Second Draw
PPP Loan. In general, the size eligibility requirement for Second Draw PPP Loans are
narrower than the size eligibility requirement for First Draw PPP Loans. With some
exceptions, an applicant is eligible for a Second Draw PPP Loan only if it, together with
its affiliates (if applicable), employs no more than 300 employees. The only exceptions
are if an Applicant:
• Is assigned a NAICS code beginning with 72 and employs no more than 300
employees per physical location; or
• Is a news organization that is majority owned or controlled by a business concern
that is assigned NAICS code 511110 or a NAICS code beginning with 5151, or is
a nonprofit public broadcasting entity with a trade or business under NAICS code
511110 or 5151, and, in either case, employs no more than 300 employees per
physical location.
64. Question: If an owner of an applicant, or a sole proprietor, self-employed individual, or
independent contractor has an Individual Taxpayer Identification Number (ITIN) instead
of a Social Security Number (SSN), can they use the ITIN on the Borrower Application
Form for a PPP loan and the forms to apply for loan forgiveness? 73
72
Question 61 published March 3, 2021 and revised on March 12, 2021 to conform to subsection III.1.h. of the
interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
73
Question 64 published March 3, 2021 and revised on March 12, 2021 to conform to subsection III.1.h. of the
interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
26
As of March 12, 2021
Answer: Yes. If an owner of an applicant, or a sole proprietor, self-employed
individual, or independent contractor has an ITIN instead of an SSN, they may use the
ITIN on the PPP Borrower Application Form (SBA Forms 2483, 2483-C, 2483-SD, and
2483-SD-C, or lender’s equivalent) and the PPP Loan Forgiveness Application Forms
(SBA Forms 3508, 3508EZ, and 3508S, or lender’s equivalent). An ITIN is a tax
processing number only available to certain nonresident and resident aliens, their
spouses, and dependents who cannot get an SSN. It is a 9-digit number, beginning with
the number “9”, formatted like an SSN (NNN-NN-NNNN). To be eligible for a PPP loan
or to receive loan forgiveness, the applicant must meet all eligibility criteria and PPP
requirements, which includes the requirement that the principal place of residence for a
sole proprietor, self-employed individual, or independent contractor must be in the
United States.
65. Question: As of December 27, 2020, is an employer that receives a First Draw PPP
Loan or Second Draw PPP Loan also eligible for the Employee Retention Credit?
Answer: The Taxpayer Certainty and Disaster Tax Relief Act of 2020, which was
enacted as Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-
260, 134 Stat. 1182, on December 27, 2020, permits an employer that received a First
Draw PPP Loan or Second Draw PPP Loan to claim the Employee Retention Credit if the
employer is otherwise an eligible employer satisfying the requirements for the
credit. However, payroll costs that are qualified wages for the Employee Retention
Credit are not eligible for loan forgiveness if the employer elects to claim the credit for
those amounts. (Additional guidance from the IRS is available at
https://www.irs.gov/pub/irs-drop/n-21-20.pdf.)
66. Question: On March 3, 2021, SBA posted Interim Final Rule “Revisions to Loan
Amount Calculation and Eligibility” allowing Schedule C filers to use gross income to
calculate PPP loan amounts. What options do lenders have to assist Schedule C filers
who already submitted a PPP loan application to use gross income to calculate their PPP
loan amount? 74
Answer: The options available to lenders depend on the status of the PPP loan
application.
• If the lender has not submitted a loan guaranty application for the Schedule C
applicant who wishes to use gross income to calculate their loan amount, the
applicant must submit to the lender SBA Form 2483-C for a First Draw PPP Loan
or SBA Form 2483-SD-C for a Second Draw PPP Loan, and the lender then must
submit a loan guaranty application to SBA through the Paycheck Protection
Platform (Platform) using SBA Form 2484 (Revised 3/21) for a First Draw PPP
Loan or SBA Form 2484-SD (Revised 3/21) for a Second Draw PPP Loan.
• If the lender has submitted a loan guaranty application to the Platform and the
loan guaranty application has not yet been approved, the lender may withdraw the
74
Question 66 published March 12, 2021.
27
As of March 12, 2021
loan guaranty application from the Platform, and resubmit a loan guaranty
application after receipt from the applicant of SBA Form 2483-C for a First Draw
PPP Loan or SBA Form 2483-SD-C for a Second Draw PPP Loan. The lender
must use SBA Form 2484 (Revised 3/21) for a First Draw PPP Loan or SBA
Form 2484-SD (Revised 3/21) for a Second Draw PPP Loan when resubmitting
the loan guaranty application.
• If SBA has issued a loan number, but the loan has not yet been disbursed, the
lender may cancel the loan in E-Tran Servicing and the applicant may apply for a
new loan using SBA Form 2483-C for a First Draw PPP Loan or SBA Form
2483-SD-C for a Second Draw PPP Loan.
• If the lender has disbursed the loan but has not filed the related Form 1502 Report
reporting disbursement of the loan, the applicant must repay the PPP loan in full,
the lender must cancel the loan in E-Tran Servicing, and the applicant may apply
for a new loan using SBA Form 2483-C for a First Draw PPP Loan or SBA Form
2483-SD-C for a Second Draw PPP Loan.
• If the lender has disbursed the loan and filed the related Form 1502 Report
reporting disbursement of the loan, no changes can be made to the loan amount
calculation.
Note: Loans must be canceled in E-Tran Servicing (not in the Platform). The Platform
may take up to 2 days to reflect the actions in E-Tran Servicing. Lender cannot enter a
new loan guaranty application until the Platform recognizes the prior loan’s cancellation.
28
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