Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act
Summary
An interim final rule of the U.S. Small Business Administration and the Department of the Treasury, Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act, 13 CFR Parts 113, 120 and 121, Docket No. SBA-2021-0001, RIN 3245-AH62 and RIN 1505-AC74. It recounts that SBA posted its first PPP interim final rule on April 2, 2020 implementing sections 1102 and 1106 of the CARES Act, and that the Economic Aid Act (Pub. L. 116-260), law since December 27, 2020, extends PPP lending authority through March 31, 2021. The rule incorporates the Economic Aid Act amendments and consolidates prior rules on borrower and lender eligibility, application and origination, loan increases and forgiveness. Its effective date is left as a placeholder, and it is signed by Administrator Jovita Carranza and Assistant Secretary Michael Faulkender.
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 113, 120 and 121
[Docket No. SBA-2021-0001]
RIN 3245-AH62
DEPARTMENT OF THE TREASURY
RIN 1505-AC74
Business Loan Program Temporary Changes; Paycheck Protection Program as Amended
by Economic Aid Act
AGENCY: U. S. Small Business Administration; Department of the Treasury.
ACTION: Interim final rule
SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) posted an
interim final rule announcing the implementation of sections 1102 and 1106 of the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act). Section 1102 of the CARES Act
temporarily adds a new program, titled the “Paycheck Protection Program,” to the SBA’s 7(a)
Loan Program. Section 1106 of the CARES Act provides for forgiveness of up to the full
principal amount of qualifying loans guaranteed under the Paycheck Protection Program (PPP).
The PPP is intended to provide economic relief to small businesses nationwide adversely
impacted by the Coronavirus Disease 2019 (COVID-19). Subsequently, SBA published twenty-
three interim final rules providing additional guidance on the PPP (some of which were jointly
issued with the Department of the Treasury) and Treasury published one interim final rule. On
December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues
Act (Economic Aid Act) (Pub. L. 116-260) became law. The Economic Aid Act extends the
authority to make PPP loans through March 31, 2021 and revises certain PPP requirements. This
interim final rule incorporates the Economic Aid Act amendments required to be implemented
by regulation within 10 days of enactment. For ease of borrower and lender reference, this
interim final rule also consolidates the interim final rules (and important guidance) issued to date
governing borrower eligibility, lender eligibility, and PPP application and origination
requirements for new PPP loans, as well as provides general rules relating to loan increases and
loan forgiveness. This rule is not intended to substantively alter or affect PPP rules that were not
amended by the Economic Aid Act. Additional rules related to second draw PPP loans will be
published separately, and SBA intends to issue a consolidated rule governing all aspects of loan
forgiveness and the loan review process as well. This interim final rule is intended to govern
new PPP loans made under the Economic Aid Act, as well as applications for loan forgiveness
on existing PPP loans where the loan forgiveness payment has not been remitted, and should not
be construed to alter or affect the requirements applicable to PPP loans closed prior to its
enactment, unless the provisions apply retroactively consistent with specific applicability
provisions of the Economic Aid Act as identified in this rule. In addition, in this interim final
rule, Treasury exercises its authority under section 1109 of the CARES Act to allow borrowers
of first draw PPP loans to use 2019 or 2020 to calculate their maximum loan amount.
DATES: Effective Date: Unless otherwise specified in this interim final rule, the provisions of
this interim final rule are effective [INSERT DATE OF FILING AT THE OFFICE OF THE
FEDERAL REGISTER].
Applicability Date: This interim final rule applies to loan applications, including requests for
increases, and applications for loan forgiveness submitted under the Paycheck Protection
Program following enactment of the Economic Aid Act. This interim final rule also applies to
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loan forgiveness applications submitted under the Paycheck Protection Program before
enactment of the Economic Aid Act where SBA has not remitted the forgiveness payment.
Comment Date: Comments must be received on or before [INSERT DATE 30 DAYS AFTER
DATE OF PUBLICATION IN THE FEDERAL REGISTER].
ADDRESSES: You may submit comments, identified by number SBA-2021-0001 through the
Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting
comments.
SBA will post all comments on www.regulations.gov. If you wish to submit confidential
business information (CBI) as defined in the User Notice at www.regulations.gov, please send an
email to ppp-ifr@sba.gov. All other comments must be submitted through the Federal
eRulemaking Portal described above. Highlight the information that you consider to be CBI and
explain why you believe SBA should hold this information as confidential. SBA will review the
information and make the final determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Call Center Representative at 833-572-0502, or
the local SBA Field Office; the list of offices can be found at https://www.sba.gov/tools/local-
assistance/districtoffices.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019
(COVID-19) pandemic of sufficient severity and magnitude to warrant an emergency declaration
for all states, territories, and the District of Columbia. With the COVID-19 emergency, many
small businesses nationwide continue to experience economic hardship as a direct result of the
Federal, State, and local public health measures that continue to be taken to minimize the
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public’s exposure to the virus. In addition, based on the advice of public health officials, other
voluntary measures continue to be observed, resulting in a decrease in economic activity as the
public avoids malls, retail stores, and other businesses.
On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic
Security Act (the CARES Act or the Act) (Pub. L. 116-136) to provide emergency assistance and
health care response for individuals, families, and businesses affected by the coronavirus
pandemic. The Small Business Administration (SBA) received funding and authority through
the Act to modify existing loan programs and establish a new loan program to assist small
businesses nationwide adversely impacted by the COVID-19 emergency.
Section 1102 of the CARES Act temporarily permitted SBA to guarantee 100 percent of 7(a)
loans under a new program titled the “Paycheck Protection Program,” pursuant to section
7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)). Section 1106 of the CARES Act
provided for forgiveness of up to the full principal amount of qualifying loans guaranteed under
the Paycheck Protection Program. A more detailed discussion of sections 1102 and 1106 of the
Act is found in section III.
On April 24, 2020, the President signed the Paycheck Protection Program and Health Care
Enhancement Act (Pub. L. 116-139), which provided additional funding and authority for the
PPP. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of
2020 (Flexibility Act) (Pub. L. 116-142), which changed key provisions of the Paycheck
Protection Program, including provisions relating to the maturity of PPP loans, the deferral of
PPP loan payments, and the forgiveness of PPP loans. Section 3(d) of the Flexibility Act
provided that the amendments relating to PPP loan forgiveness and extension of the deferral
period for PPP loans were effective as if included in the CARES Act, which meant that they
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were retroactive to March 27, 2020. Section 2 of the Flexibility Act provided that the
amendment relating to the extension of the maturity date for PPP loans became effective on the
date of enactment (June 5, 2020). Under the Flexibility Act, the extension of the maturity date
for PPP loans was applicable to PPP loans made on or after that date, and lenders and borrowers
were able to mutually agree to modify PPP loans made before such date to reflect the longer
maturity. On July 4, 2020, Public Law 116-147 extended the authority for SBA to guarantee
PPP loans to August 8, 2020. On December 27, 2020, the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (Economic Aid Act) (Pub. L. 116-260) was enacted,
which reauthorizes lending under the PPP through March 31, 2021, and among other things,
modifies provisions related to making PPP loans and forgiveness of PPP loans, and authorizes
second draw PPP loans under new section 7(a)(37) of the Small Business Act for PPP borrowers
that previously received a PPP loan (rules for second draw loans will be published separately).
The Economic Aid Act also redesignates section 1106 of the CARES Act as section 7A and
transfers that section to the Small Business Act, to appear after section 7 of the Small Business
Act.1
In addition to incorporating the changes to PPP requirements made by the Economic Aid
Act, this interim final rule consolidates and restates the following interim final rules: 85 Fed.
Reg. 20811 (posted on April 2, 2020 and published in the Federal Register on April 15, 2020);
85 Fed. Reg. 20817 (posted on April 3, 2020 and published on April 15, 2020); 85 Fed. Reg.
21747 (posted on April 14, 2020 and published on April 20, 2020); 85 Fed. Reg. 23450 (posted
on April 24, 2020 and published on April 28, 2020); 85 Fed. Reg. 23917 (posted on April 27,
1
Because section 1106 of the CARES Act is now codified as section 7A of the Small Business Act, any reference to
section 1106 of the CARES Act in the rules that are being restated herein will refer to section 7A.
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2020 and published on April 30, 2020); 85 Fed. Reg. 26321 (posted on April 28, 2020 and
published on May 4, 2020); 85 Fed. Reg. 26324 (posted on April 30, 2020 and published on May
4, 2020); 85 Fed. Reg. 27827 (posted on May 5, 2020 and published on May 8, 2020); 85 Fed.
Reg. 29845 (posted on May 8, 2020 and published on May 19, 2020); 85 Fed. Reg. 29842
(posted on May 13, 2020 and published on May 19, 2020); 85 Fed. Reg. 29847 (posted on May
14, 2020 and published on May 19, 2020); 85 Fed. Reg. 30835 (posted on May 18, 2020 and
published on May 21, 2020); 85 Fed. Reg. 31357 (posted on May 20, 2020 and published on
May 26, 2020); 85 Fed. Reg. 35550 (posted on June 5, 2020 and published on June 11, 2020); 85
Fed. Reg. 36308 (posted on June 11, 2020 and published on June 16, 2020); 85 Fed. Reg. 36717
(posted on June 12, 2020 and published on June 18, 2020); 85 Fed. Reg. 36997 (posted on June
17, 2020 and published on June 19, 2020); 85 Fed. Reg. 38301 (posted on June 24, 2020 and
published on June 26, 2020); and 85 Fed. Reg. 39066 (posted on June 25, 2020 and published on
June 30, 2020). This rule should be interpreted consistently with the sets of Frequently Asked
Questions (FAQs) regarding the PPP that are posted on SBA’s and Treasury’s websites and the
interim final rules posted separately providing guidance on second draw PPP loans and the
consolidated guidance on loan forgiveness and the loan review process; however, the Economic
Aid Act overrides any conflicting guidance in the FAQs, and SBA will be revising the FAQs to
fully conform to the Economic Aid Act as quickly as feasible.
Most of this document restates existing regulatory provisions to provide lenders and new PPP
borrowers a single regulation to consult on borrower eligibility, lender eligibility, and loan
application and origination requirements, as well as general rules on increases and loan
forgiveness for PPP loans. To enhance the readability of this document, SBA has not reproduced
the policy and legal justifications for existing regulatory provisions restated here, except to the
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extent that those justifications may be helpful to the borrower or lender. However, those
justifications from the original interim final rules are incorporated by reference here.
In addition, section 1109(b) of the CARES Act authorizes Treasury to establish criteria for
certain other lenders to participate in the PPP. The SBA is required to administer the program
that Treasury establishes under section 1109 of the Act, with guidance from Treasury. The
CARES Act authorizes Treasury to issue regulations and guidance to implement section 1109,
including regulations that establish “terms and conditions” for PPP loans. See section
1109(d)(2). The terms and conditions established by Treasury under section 1109 are not
required to be identical to those provided elsewhere. Rather, the CARES Act allows Treasury to
set terms and conditions pertaining to certain criteria—the maximum interest rate, maximum
loan amount, and other specified terms—that are “consistent,” to “the maximum extent
practicable,” with comparable terms in paragraph 36 of section 7(a) of the Small Business Act
(15 U.S.C. 636(a)). See section 1109(d)(2).
In this rulemaking, Treasury is addressing the needs of new PPP borrowers by allowing all
new borrowers to use 2019 or 2020 for purposes of calculating their maximum loan amount.
Section 1102 of the CARES Act states that borrowers are to calculate their maximum loan
amount by using “payroll costs incurred during the 1-year period before the date on which the
loan is made….” For PPP loans made in 2020, most borrowers used 2019. The Economic Aid
Act did not change this language for borrowers that are not farmers and ranchers and would
require most new PPP borrowers who obtain a loan in 2021 to use 2020 as their base period.
Using authority granted by section 1109 of the CARES Act, this rulemaking allows new
borrowers to choose 2019 or 2020 as the base period, thereby ensuring that they are able to
obtain funding on terms commensurate with existing PPP borrowers. Separately, section 313 of
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the Economic Aid Act states that farmers and ranchers are to calculate their maximum loan
amount using 2019 as their base period. This rulemaking allows farmers and ranchers to elect
either 2019 or 2020 as their base period, in order to ensure that they can obtain funding on terms
commensurate with those available to other new PPP borrowers.
As required by section 1109(d)(2)(B) of the CARES Act, Treasury has determined that
providing new PPP borrowers with flexibility in choosing a base period is consistent, to the
“maximum extent practicable,” with the terms applicable to existing PPP borrowers. This
enhanced flexibility will help ensure that new PPP borrowers are treated even-handedly and do
not see their permissible loan amounts reduced due to financial distress experienced in 2020.
Other than these adjustments, the terms and requirements applicable to PPP loans under this rule
are identical to the terms and requirements applicable to all other PPP loans. As a result, a PPP
borrower that elects to use the flexibility in selecting a base period under this interim final rule
may follow the same processes and procedures applicable to other PPP loans.
II. Comments and Immediate Effective Date
This interim final rule is being issued without advance notice and public comment because
section 303 of the Economic Aid Act authorizes SBA to issue regulations to implement the
Economic Aid Act without regard to notice requirements. In addition, this rule is being issued to
allow for immediate implementation of this program. The intent of both the CARES Act and the
Economic Aid Act is that SBA provides relief to America’s small businesses expeditiously.
Congress reauthorized PPP because of the current economic conditions affecting small
businesses and intended for the loans to be made quickly. The last day to apply for and receive a
PPP loan is March 31, 2021. Given the short duration of this program, and the urgent need to
issue loans quickly, the Administrator in consultation with the Secretary has determined that it is
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impractical and not in the public interest to provide a 30-day delayed effective date. An
immediate effective date will give small businesses the maximum amount of time to apply for
loans and lenders the maximum amount of time to process applications before the program ends.
This good cause justification also supports waiver of the 60-day delayed effective date for major
rules under the Congressional Review Act at 5 U.S.C. 808(2). Although this interim final rule is
effective immediately, comments are solicited from interested members of the public on all
aspects of the interim final rule, including section III. These comments must be submitted on or
before [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL
REGISTER]. The SBA will consider these comments and the need for making any revisions as
a result of these comments.
III. Paycheck Protection Program as Amended by Economic Aid Act
Overview
The CARES Act was enacted to provide immediate assistance to individuals, families, and
businesses affected by the COVID-19 emergency. Among the provisions contained in the
CARES Act are provisions authorizing SBA to temporarily guarantee loans under a new 7(a)
loan program titled the “Paycheck Protection Program.” Loans guaranteed under the Paycheck
Protection Program (PPP) will be 100 percent guaranteed by SBA, and the full principal amount
of the loans may qualify for loan forgiveness. The Economic Aid Act reauthorizes lending under
the PPP through March 31, 2021, and revises certain PPP requirements. The following outlines
the key provisions of the PPP related to eligibility of applicants for PPP loans, which lenders are
authorized to make PPP loans, the process for making PPP loans, loan increases, and loan
forgiveness, as revised by the Economic Aid Act. Additional rules related to second draw PPP
loans will be published separately. While this interim final rule fully implements the Economic
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Aid Act’s changes to loan forgiveness, SBA also intends to issue a consolidated rule governing
all aspects of loan forgiveness and loan review as well to provide a single reference point for
lenders and borrowers.
Table of Contents
A. General
B. What Do Borrowers Need to Know and Do?
1. What businesses, organizations, and individuals are eligible?
2. What businesses, organizations, and individuals are ineligible?
3. Affiliation rules generally
4. I have determined that I am eligible. How much can I borrow?
5. What is the interest rate on a PPP loan?
6. What will be the maturity date on a PPP loan?
7. Can I apply for more than one First Draw PPP Loan?
8. Can I use e-signatures or e-consents if a borrower has multiple owners?
9. When will I have to begin paying principal and interest on my PPP loan?
10. What forms do I need and how do I submit an application for a PPP loan?
11. How can PPP loans be used?
12. What certifications need to be made?
13. Limited safe harbor with respect to certification concerning need for PPP loan
request.
14. Can my PPP loan be forgiven in whole or in part?
15. Do independent contractors count as employees for purposes of PPP loan
forgiveness?
16. For loans made prior to December 27, 2020, what additional documentation must
a borrower submit when 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 of the preceding, directly or indirectly holds a controlling
interest in the borrower?
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C. What Do Lenders Need to Know and Do?
1. Who is eligible to make PPP loans?
2. Do lenders have to register in SAM.gov to make PPP loans?
3. What do lenders have to do in terms of loan underwriting?
4. Can lenders rely on borrower documentation for loan forgiveness?
5. What fees will lenders be paid?
6. Can PPP loans be sold into the secondary market?
7. Do the requirements for loan pledges under 13 CFR 120.434 apply to PPP loans
pledged for borrowings from a Federal Reserve Bank (FRB) or advances by a
Federal Home Loan Bank (FHLB)?
8. Are lenders required to use a promissory note provided by SBA or may they use
their own?
9. Are lenders required to use a separate SBA Authorization document to issue PPP
loans?
10. By when must a lender electronically submit an SBA Form 1502 indicating that
PPP loan funds have been disbursed?
11. How do lenders report disbursements on PPP loans that are approved for loan
increases due to the Economic Aid Act?
D. What Do Both Borrowers and Lenders Need to Know and Do?
1. What are the loan terms and conditions?
2. Do lenders have to apply the “credit elsewhere test”?
3. Are there any fee waivers?
4. Who pays the fee to an agent who provides assistance in connection with a PPP
loan?
5. Can a borrower take multiple draws from a PPP loan and thereby delay the start
of the covered period?
6. If a partnership received a PPP loan that did not include any compensation for its
partners, can the loan amount be increased to include partner compensation?
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7. If a seasonal employer received a PPP loan before December 27, 2020, can the
loan amount be increased based on a revised calculation of the maximum loan
amount?
8. Which other PPP borrowers can reapply or request an increase in their PPP loan
amount?
9. If a borrower’s PPP loan has already been fully disbursed, can the lender make an
additional disbursement for the increased loan proceeds?
10. Are recipients of PPP loans entitled to exemptions on the grounds provided in
Federal nondiscrimination laws for sex-specific admissions practices, sex-specific
domestic violence shelters, coreligionist housing, or Indian tribal preferences in
connection with adoption or foster care practices?
A. General
SBA is authorized to guarantee loans under the PPP through March 31, 2021. Congress has
authorized a total program level of $806,450,000,000 to provide guaranteed loans under this
temporary 7(a) program under sections 7(a)(36) (PPP loans or First Draw PPP Loans) and
7(a)(37) (Second Draw PPP Loans) of the Small Business Act, a portion of which is available
for new First Draw and Second Draw PPP Loans. Lenders have delegated authority to make
PPP loans. SBA will allow lenders to rely on certifications of the borrower in order to
determine eligibility of the borrower and use of loan proceeds and to rely on specified
documents provided by the borrower to determine qualifying loan amount and eligibility for
loan forgiveness. Lenders must comply with the applicable lender obligations set forth in
this interim final rule, but will be held harmless for borrowers’ failure to comply with
program criteria and will not be subject to any enforcement action or penalty relating to loan
origination or forgiveness of the PPP loan if the lender acts in good faith relating to the
origination or forgiveness of the PPP loan and satisfies all other applicable Federal, State,
local, and other statutory or regulatory requirements (as provided in section 7A(h) of the
Small Business Act, as amended). Remedies for violations of PPP requirements or fraud are
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separately addressed in this interim final rule. The program requirements of the PPP
identified in this rule temporarily supersede any conflicting Loan Program Requirement (as
defined in 13 CFR 120.10).
B. What Do Borrowers Need to Know and Do?
1. What businesses, organizations, and individuals are eligible?
a. Am I eligible?2,3
You are eligible for a PPP loan if:
i. you, together with any affiliates (if applicable),4 are:
• a small business concern under the applicable revenue-based size standard
established by SBA in 13 C.F.R. 121.201 for your industry or under the SBA
alternative size standard5;
• an independent contractor, eligible self-employed individual, or sole
proprietor;
• a business concern, a tax-exempt nonprofit organization described in section
501(c)(3) of the Internal Revenue Code (IRC), a tax-exempt veterans
organization described in section 501(c)(19) of the IRC, a Tribal business
concern described in section 31(b)(2)(C) of the Small Business Act, and you
2
See interim final rule on Second Draw PPP Loans for eligibility criteria for Second Draw PPP Loans, which is
being published separately.
3
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.a. (April 15, 2020), as amended
by 85 Fed. Reg 36308 (June 16, 2020), 85 Fed. Reg. 36717 (June 18, 2020), and 85 Fed. Reg 38301 (June 26, 2020),
and has been modified to reflect subsequent rules or guidance and the Economic Aid Act.
4
See section 3 regarding the applicability of affiliation rules at 13 CFR 121.103 and 121.301 to PPP loans.
5
Under SBA’s alternative size standard, a business concern may qualify as a small business concern if it, together
with any affiliates: (1) has a maximum tangible net worth of not more than $15 million; and (2) the average net
income after Federal income taxes (excluding any carry-over losses) for the two full fiscal years before the date of
application is not more than $5 million.
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employ no more than the greater of 500 employees or, if applicable, the size
standard in number of employees established by SBA in 13 C.F.R. 121.201;
• a housing cooperative, an eligible section 501(c)(6) organization, or an
eligible destination marketing organization6, that employs no more than 300
employees;
• a news organization that is majority owned or controlled by a NAICS code
511110 or 5151 business or a nonprofit public broadcasting entity with a trade
or business under NAICS 511110 or 5151, that employs no more than 500
employees (or, if applicable, the size standard in number of employees
established by SBA in 13 C.F.R. 121.201 for your industry) per location; or
• another type of entity specifically provided for by PPP rules (as described
below); and
ii. you were in operation on February 15, 2020, and either had employees for whom
you paid salaries and payroll taxes or paid independent contractors, as reported on a
Form 1099-MISC or you were an eligible self-employed individual, independent
contractor, or sole proprietorship with no employees.
You must submit documentation sufficient to establish eligibility and to demonstrate the
qualifying payroll amount, which may include, as applicable, payroll records, payroll tax
filings, Form 1099-MISC, Schedule C or F, income and expenses from a sole
proprietorship, or bank records.
6
See subsections 1.j., 1.k., and 1.m. for additional information on the eligibility of housing cooperatives, section
501(c)(6) organizations, and destination marketing organizations. The applicable size standard for these entities is
not more than 300 employees.
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b. Are employees of foreign affiliates included for purposes of determining whether a PPP
borrower has more than 500 employees (or 300 employees, if applicable)?7
Yes. SBA’s affiliation regulations provide that to determine a concern’s size, employees
of the concern “and all of its domestic and foreign affiliates” are included. 13 C.F.R.
121.301(f). Therefore, to calculate the number of employees of an entity for purposes of
determining eligibility for the PPP, an entity must include all employees of its domestic
and foreign affiliates, except in those limited circumstances where the affiliation rules
expressly do not apply to the entity.8 Any entity that, together with its domestic and
foreign affiliates, does not meet the 500-employee, 300-employee,9 or other applicable
PPP size standard is therefore ineligible for a PPP loan. Under no circumstances may
PPP funds be used to support non-U.S. workers or operations.
7
This subsection was originally published at 85 Fed. Reg. 30835, section III.1. (May 21, 2020) and has been
modified for readability. Housing cooperatives, section 501(c)(6) organizations, and destination marketing
organizations, added by the Economic Aid Act, must have no more than 300 employees to be eligible for PPP loans.
8
Paragraph 7(a)(36)(D)(iv) of the Small Business Act (15 U.S.C. 636(a)(36)(D)(iv)), as added by the CARES Act
and amended by the Economic Aid Act, waives SBA’s affiliation rules for (1) any business concern with not more
than 500 employees that, as of the date on which the loan is disbursed, is assigned a North American Industry
Classification System code beginning with 72; (2) any business concern operating as a franchise that is assigned a
franchise identifier code by the Administration; (3) any business concern that receives financial assistance from a
company licensed under section 301 of the Small Business Investment Act of 1958 (15 U.S.C. 681); and (4)(a) any
business concern (including any station which broadcasts pursuant to a license granted by the Federal
Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. 301 et seq.) without
regard for whether such a station is a concern as defined in section 121.105 of title 13, Code of Federal Regulations,
or any successor thereto) that employs not more than 500 employees, or the size standard established by the
Administrator for the North American Industry Classification System code applicable to the business concern, per
physical location of such business concern and is majority owned or controlled by a business concern that is
assigned a North American Industry Classification System code beginning with 511110 or 5151; or (b) any
nonprofit organization that is assigned a North American Industry Classification System code beginning with 5151.
SBA also applies affiliation exceptions to certain categories of entities. 13 C.F.R. 121.103(b).
9
For housing cooperatives, section 501(c)(6) organizations, and destination marketing organizations, the applicable
size standard is not more than 300 employees. See subsections 1.j. and 1.m. For the applicable size standard for
entities eligible to apply for Second Draw PPP Loans, see the interim final rule on Second Draw PPP Loans that is
being published separately.
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c. I have income from self-employment and file a Form 1040, Schedule C. Am I eligible for
a PPP Loan?10
You are eligible for a PPP loan if: (i) you were in operation on February 15, 2020; (ii)
you are an individual with self-employment income (such as an independent contractor or
a sole proprietor); (iii) your principal place of residence is in the United States; and (iv)
you filed or will file a Form 1040 Schedule C for 2019 or meet the requirements below.
However, if you are a partner in a partnership, you may not submit a separate PPP loan
application for yourself as a self-employed individual. Instead, the self-employment
income of general active partners may be reported as a payroll cost, up to $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 on a PPP loan application filed by or on
behalf of the partnership. Partnerships are eligible for PPP loans under the CARES Act,
as amended by the Economic Aid Act, and the Administrator has determined, in
consultation with the Secretary of the Treasury (Secretary), that limiting a partnership
and its partners (and an LLC filing taxes as a partnership) to one PPP loan is necessary to
help ensure that as many eligible borrowers as possible obtain PPP loans before the
statutory deadline of March 31, 2021. This limitation will allow lenders to more quickly
process applications and lower the burdens of applying for partnerships/partners. The
Administrator has further determined that permitting partners to apply as self-employed
individuals would create unnecessary confusion regarding which entity, the partner or the
partnership, applies for partner and LLC member income, and would generate loan
10
This subsection was originally published at 85 Fed. Reg. 21747, subsection III.1.a. (April 20, 2020) and has been
modified to reflect subsequent interim final rules or guidance and the Economic Aid Act.
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proceeds use coordination and allocation issues. Rent, mortgage interest, utilities, other
debt service, operations expenditures, property damage costs, supplier costs, and worker
protection expenditures are generally incurred at the partnership level, not partner level,
so it is most natural to provide the funds for these expenses to the partnership, not
individual partners. In addition, you should be aware that participation in the PPP may
affect your eligibility for state-administered unemployment compensation or
unemployment assistance programs, including the programs authorized by Title II,
Subtitle A of the CARES Act, or CARES Act Employee Retention Credits. On June 26,
2020, SBA issued additional guidance for those individuals with self-employment
income who: (i) were not in operation in 2019 but who were in operation on February 15,
2020, and (ii) filed a Form 1040 Schedule C for 2020. See “How To Calculate Maximum
Loan Amounts – By Business Type,” Question 10 posted on SBA’s website.11
d. Are eligible businesses owned by directors or shareholders of a PPP lender permitted to
apply for a PPP loan through the lender with which they are associated?12
SBA regulations (including 13 CFR 120.110 and 120.140) shall not apply to prohibit an
otherwise eligible business owned (in whole or part) by an outside director or holder of a
less than 30 percent equity interest in a PPP lender from obtaining a PPP loan from the
PPP lender on whose board the director serves or in which the equity owner holds an
interest, provided that the eligible business owned by the director or equity holder follows
the same process as any similarly situated customer or account holder of the lender.
11
https://www.sba.gov/sites/default/files/2020-12/How-to-Calculate-Loan-Amounts-508_6-26-20.pdf (April 20,
2020).
12
This subsection was originally published at 85 Fed. Reg. 21747, subsection III.2.a. (April 20, 2020) and has been
modified for readability.
17
Favoritism by the lender in processing time or prioritization of the director’s or equity
holder’s PPP application is prohibited. Lenders should comply with all other applicable
state and federal regulations concerning loans to associates of the lender. Lenders should
also consult their own internal policies concerning lending to individuals or entities
associated with the lender.
The foregoing paragraph does not apply to a director or owner who is also an officer or
key employee of the PPP Lender. Officers and key employees of a PPP Lender may
obtain a PPP Loan from a different lender, but not from the PPP Lender with which they
are associated. SBA also reminds Lenders that the “Authorized Lender Official” for each
PPP Loan is subject to the limitations described in the PPP Lender Application Form
(SBA Form 2484), which states in relevant part: “Neither the undersigned Authorized
Lender Official, nor such individual’s spouse or children, has a financial interest in the
Applicant [Borrower].”
e. If a seasonal business was dormant or not fully operating as of February 15, 2020, is it
still eligible?13
Yes, in evaluating eligibility, a seasonal business will be considered to have been in
operation as of February 15, 2020, if the business was in operation for any 12-week
period between February 15, 2019 and February 15, 2020. This approach aligns the
eligibility criteria for seasonal businesses being in operation with the time period for
calculation of a seasonal employer’s maximum loan amount from section 336 of the
13
This subsection was originally published at 85 Fed. Reg. 23917, subsection III.4. (April 30, 2020) and has been
modified to reflect the Economic Aid Act.
18
Economic Aid Act and makes PPP loans available to seasonal businesses that operate
outside of the original, more limited time frame.
f. How does the 500 employee limit apply to news organizations with more than one
physical location?14
A business concern, or any station which broadcasts pursuant to a license granted by the
Federal Communications Commission under title III of the Communications Act of 1934
(47 U.S.C. 301 et seq.), with more than one physical location that employs not more than
500 employees (or the size standard established by the Administrator for the NAICS code
applicable to the business concern) per physical location, is eligible for a PPP loan if it:
(1) is majority owned or controlled by a business concern that is assigned a NAICS code
beginning with 511110 or 5151 or, with respect to a public broadcasting entity (as
defined in section 397(11) of the Communications Act of 1934 (47 U.S.C. 397(11))), has
a trade or business that falls under such a code; and (2) makes a good faith certification
that proceeds of the loan will be used to support expenses at the component of the
organization that produces or distributes locally focused or emergency information. See
section 3 for the applicability of SBA’s affiliation rules to news organizations.
g. Industry-Specific Eligibility Issues
i. Is a hospital owned by governmental entities eligible for a PPP loan?15
Notwithstanding 13 CFR 120.110(j), a hospital that is otherwise eligible to receive a
PPP loan as a business concern or nonprofit organization (described in section
501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under
14
This subsection has been added to conform to section 317 of the Economic Aid Act.
15
This subsection was originally published at 85 Fed. Reg. 23450, subsection III.2.c. (April 28, 2020) and has been
modified for readability.
19
section 501(a) of such Code) shall not be rendered ineligible for a PPP loan due to
ownership by a state or local government if the hospital receives less than 50% of its
funding from state or local government sources, exclusive of Medicaid.
ii. Are businesses that receive revenue from legal gaming eligible for a PPP Loan?16
A business that is otherwise eligible for a PPP Loan is not rendered ineligible due to
its receipt of legal gaming revenues, and 13 CFR 120.110(g) is inapplicable to PPP
loans. Businesses that received illegal gaming revenue remain categorically
ineligible.
iii. Are electric cooperatives that are exempt from Federal income taxation under section
501(c)(12) of the Internal Revenue Code eligible for a PPP loan?17
Yes. An electric cooperative that is exempt from Federal income taxation under
section 501(c)(12) of the Internal Revenue Code will be considered to be “a business
entity organized for profit” for purposes of 13 CFR 121.105(a)(1). As a result, such
entities are eligible PPP borrowers, as long as other eligibility requirements are met.
To be eligible, an electric cooperative must satisfy the employee-based size standard
established in the CARES Act, SBA’s employee-based size standard corresponding to
its primary industry, if higher, or both tests in SBA’s “alternative size standard.”18
16
This subsection was originally published at 85 Fed. Reg. 23450, subsection III.2.d. (April 28, 2020) and has been
modified for readability.
17
This subsection was originally published at 85 Fed. Reg. 29847, subsection III.1. (May 19, 2020) and has been
modified for readability.
18
Under the alternative size standard, a business concern, including an electric cooperative, can qualify for the PPP
as a small business concern if, as of March 27, 2020: (1) the maximum tangible net worth of the business was 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. For an
electric cooperative that does not have net income, the cooperative’s savings distributed to its owner-members will
be considered its net income.
20
iv. Are telephone cooperatives that are exempt from federal income taxation under
section 501(c)(12) of the Internal Revenue Code eligible for a PPP loan?19
Yes. A telephone cooperative that is exempt from federal income taxation under
section 501(c)(12) of the Internal Revenue Code will be considered to be “a business
entity organized for profit” for purposes of 13 CFR 121.105(a)(1). As a result, such
entities are eligible PPP borrowers, as long as other eligibility requirements are met.
To be eligible, a telephone cooperative must satisfy the employee-based size standard
established in the CARES Act, SBA’s employee-based size standard corresponding to
its primary industry, if higher, or both tests in SBA’s “alternative size standard.”20
v. Are housing cooperatives as defined in section 216(b) of the Internal Revenue Code
eligible for PPP loans?21
Yes. Housing cooperatives (as defined in section 216(b) of the Internal Revenue
Code of 1986) that employ not more than 300 employees are eligible to apply for PPP
loans as long as other eligibility requirements are met. In addition, the provisions
applicable to affiliation, described in section 3, apply to housing cooperatives in the
same manner as with respect to a small business concern.
vi. Are nonprofit and tax-exempt news organizations eligible for PPP loans?22
19
This subsection was originally published at 85 Fed. Reg. 35550, subsection III.1. (June 11, 2020) and has been
modified for readability.
20
Under the alternative size standard, a business concern, including a telephone cooperative, can qualify for the PPP
as a small business concern if, as of March 27, 2020: (1) the maximum tangible net worth of the business was 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. For a
telephone cooperative that does not have net income, the telephone cooperative’s capital credits distributed to its
owner-members will be considered its net income.
21
This subsection has been added to conform to section 316 of the Economic Aid Act.
22
This subsection has been added to conform to section 317 of the Economic Aid Act.
21
Yes. A public broadcasting entity (as defined in section 397(11) of the
Communications Act of 1934 (47 U.S.C. 397(11)) that is a nonprofit organization or
any organization otherwise subject to section 511(a)(2)(B) of the Internal Revenue
Code of 1986, and employs no more than 500 employees (or, if applicable, the size
standard in number of employees established by SBA in 13 C.F.R. 121.201 for the
entity’s industry) per location is eligible for a PPP loan if the organization has a trade
or business that is assigned a NAICS code beginning with 511110 or 5151, and
makes a good faith certification that proceeds of the loan will be used to support
expenses at the component of the organization that produces or distributes locally
focused or emergency information.23 See subsection B.1.f. for information on how
the 500 employee limit applies to news organizations with more than one physical
location. See section 3 for the applicability of SBA’s affiliation rules to news
organizations.
vii. Are destination marketing organizations eligible for PPP loans?24
Yes. Under the Economic Aid Act, any destination marketing organization25 is
eligible to receive a PPP loan as long as other eligibility requirements are met and if:
23
This subsection provides that an eligible nonprofit news organization under section 317 of the Economic Aid Act
must have no more than 500 employees. (For those nonprofit news organizations with more than one physical
location, they must have no more than 500 employees per location.) This will make PPP loans available to nonprofit
news organizations, regardless of whether the organization would be a business concern under SBA regulations, if
the nonprofit news organization satisfies the same general size standard applicable under the PPP rules to other
borrowers that are nonprofit or tax-exempt organizations. The Administrator, in consultation with the Secretary, has
determined this requirement appropriately implements section 317 of the Economic Aid Act by making PPP loans
available to nonprofit news organizations on the same terms as other nonprofit organizations that have been made
eligible for PPP loans.
24
This subsection has been added to conform to section 318 of the Economic Aid Act.
25
Section 318 of the Economic Aid Act added the following definition to paragraph 7(a)(36)(A) of the Small
Business Act (15 U.S.C. 636(a)(36)(A)): “(xv) the term ‘destination marketing organization’ means a nonprofit
entity that is -- (I) an organization described in section 501(c) of the Internal Revenue Code of 1986 and exempt
22
(1) the destination marketing organization does not receive more than 15 percent of
its receipts from lobbying activities; (2) the lobbying activities of the destination
marketing organization do not comprise more than 15 percent of the total activities of
the organization; (3) the cost of the lobbying activities of the destination marketing
organization did not exceed $1,000,000 during the most recent tax year of the
destination marketing organization that ended prior to February 15, 2020; (4) the
destination marketing organization employs not more than 300 employees; and (5)
the destination marketing organization: (a) is described in section 501(c) of the
Internal Revenue Code and is exempt from taxation under section 501(a) of such
Code; or (b) is a quasi-governmental entity or is a political subdivision of a State or
local government, including any instrumentality of those entities.26
viii. Are 501(c)(6) organizations eligible for PPP loans?27
Yes. Any organization that is described in section 501(c)(6) of the Internal Revenue
Code and that is exempt from taxation under section 501(a) of such Code (excluding
professional sports leagues and organizations with the purpose of promoting or
participating in a political campaign or other activity) shall be eligible to receive a
PPP loan as long as other eligibility requirements are met and if: (1) the organization
from tax under section 501(a) of such Code; or (II) a State, or a political subdivision of a State (including any
instrumentality of such entities) -- (aa) engaged in marketing and promoting communities and facilities to businesses
and leisure travelers through a range of activities, including -- (AA) assisting with the location of meeting and
convention sites; (BB) providing travel information on area attractions, lodging accommodations, and restaurants;
(CC) providing maps; and (DD) organizing group tours of local historical, recreational, and cultural attractions; or
(bb) that is engaged in, and derives the majority of the operating budget of the entity from revenue attributable to,
providing live events.
26
A destination marketing organization that is a quasi-governmental entity or is a political subdivision of a State or
local government, including any instrumentality of those entities, is eligible for a PPP loan notwithstanding the SBA
regulation at 13 CFR 120.110(j), which states that government-owned entities (except for businesses owned or
controlled by a Native American tribe) are not eligible for SBA financial assistance.
27
This subsection has been added to conform to section 318 of the Economic Aid Act.
23
does not receive more than 15 percent of its receipts from lobbying activities; (2) the
lobbying activities of the organization do not comprise more than 15 percent of the
total activities of the organization; (3) the cost of the lobbying activities of the
organization did not exceed $1,000,000 during the most recent tax year of the
organization that ended prior to February 15, 2020; and (4) the organization employs
not more than 300 employees.
2. What businesses, organizations, and individuals are ineligible?
a. Could I be ineligible even if I meet the eligibility requirements in section 1?28
You are ineligible for a PPP loan if, for example:
i. You are engaged in any activity that is illegal under Federal, state, or local law;
ii. You are a household employer (individuals who employ household employees
such as nannies or housekeepers);
iii. An owner of 20 percent or more of the equity of the applicant is presently
incarcerated or, for any felony, 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 or any other felony within the last year;
28
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.a. (April 15, 2020), as amended
by 85 Fed. Reg 36308 (June 16, 2020), 85 Fed. Reg. 36717 (June 18, 2020), and 85 Fed. Reg 38301 (June 26, 2020),
and has been modified to conform to subsequent interim final rules or guidance and the Economic Aid Act and for
readability.
24
iv. You, or any business owned or controlled by you or any of your owners, has ever
obtained a direct or guaranteed loan from SBA or any other Federal agency that is
currently delinquent or has defaulted within the last seven years and caused a loss
to the government;
v. Your business or organization was not in operation on February 15, 2020;29
vi. You or your business received or will receive a grant under the Shuttered Venue
Operator Grant program under section 324 of the Economic Aid Act;30
vii. The President, the Vice President, the head of an Executive Department, or a
Member of Congress, or the spouse of such person as determined under
applicable common law, directly or indirectly holds a controlling interest in your
business;31
viii. Your business is an issuer, the securities of which are listed on an exchange
registered as a national securities exchange under section 6 of the Securities
Exchange Act of 1934 (15 U.S.C. 78f)32 (SBA will not consider whether a news
organization that is eligible under the conditions described in subsection 1.f. and
1.g.vi. is affiliated with an entity, which includes any entity that owns or controls
such news organization, that is an issuer33); or
29
Added to conform to section 310 of the Economic Aid Act. This provision is effective as if included in the
CARES Act and applies to any loan made pursuant to section 7(a)(36) of the Small Business Act before, on, or after
December 27, 2020, including forgiveness of such a loan.
30
Added to conform to section 310 of the Economic Aid Act. This provision applies to PPP loans made on or after
December 27, 2020.
31
Added to conform to section 322 of the Economic Aid Act. This provision applies to any loan made on or after
December 27, 2020. For any loan made under section 7(a)(36) to a covered entity before December 27, 2020, see
subsection B.16 of this interim final rule.
32
Added to conform to section 342 of the Economic Aid Act, which also added the following definitions to
paragraph 7(a)(36)(A) of the Small Business Act (15 U.S.C. 636(a)(36)(A)): “(xvi) the terms ‘exchange’, ‘issuer’,
and ‘security’ have the meanings given those terms in section 3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)).” This provision applies to loans made on or after December 27, 2020.
33
See section 317 of the Economic Aid Act.
25
ix. Your business has permanently closed.34
b. Are businesses that are generally ineligible for 7(a) loans under 13 CFR 120.110 eligible
for a PPP loan?35
Paragraphs (a), (g), and (k), of 13 C.F.R. 120.110 do not apply to PPP loans. For PPP
loans, the ineligibility restriction in 13 C.F.R. 120.110(n) is superseded by subsection
B.2.a.iii. of this interim final rule. Otherwise, a business is not eligible for a PPP loan if
it is a type of business concern (or would be, if the entity were a business concern)
described in 13 C.F.R. 120.110, except as permitted by subsections B.1.d and B.1.g of
this rule or otherwise permitted by PPP rules. Businesses that are not generally eligible
for a 7(a) loan under 13 C.F.R. 120.110 are described further in SBA’s Standard
Operating Procedure (SOP) 50 10 6, Part 2, Section A, Chapter 3.36
c. Will I be approved for a PPP loan if my business is in bankruptcy?37
No. If the applicant or the owner of the applicant is the debtor in a bankruptcy
proceeding, either at the time it submits the application or at any time before the loan is
disbursed, the applicant is ineligible to receive a PPP loan. If the applicant or the owner
of the applicant becomes the debtor in a bankruptcy proceeding after submitting a PPP
34
This provision prohibits an entity that has gone out of business and has no intention of reopening from receiving a
PPP loan. The Administrator, in consultation with the Secretary, has determined this provision is necessary to
maintain program integrity, prevent abuse, and prevent PPP loans being made to businesses that have permanently
closed. Preserving funds for businesses in operation is necessary because only businesses that are still in operation
will retain employees, which is a primary purposes of the PPP. PPP was not intended to support businesses that
have permanently closed. A borrower that has temporarily closed or temporarily suspended its business but intends
to reopen remains eligible for a PPP loan.
35
This subsection replaces the subsection originally published at 85 Fed. Reg. 20811, subsection III.2.c. (“How do I
determine if I am ineligible”) (April 15, 2020) and modified to conform to the Economic Aid Act.
36
SOP 50 10 6 can be found at https://www.sba.gov/document/sop-50-10-lender-development-company-loan-
programs-0. For PPP loans approved before December 27, 2020, see SOP 50 10 5(K), Subpart B, Chapter 2 for
ineligible types of businesses. SOP 50 10 5(K) can be found at https://www.sba.gov/document/sop-50-10-5-lender-
development-company-loan-programs.
37
This subsection was originally published at 85 Fed. Reg. 23450, subsection III.4. (April 28, 2020) and has been
modified for readability.
26
application but before the loan is disbursed, it is the applicant’s obligation to notify the
lender and request cancellation of the application. Failure by the applicant to do so will
be regarded as a use of PPP funds for unauthorized purposes.
The Borrower Application Form for PPP loans (SBA Form 2483), which reflects this
restriction in the form of a borrower certification, is a loan program
requirement. Lenders may rely on an applicant’s representation concerning the
applicant’s or an owner of the applicant’s involvement in a bankruptcy proceeding.
d. Is a hedge fund or private equity firm eligible for a PPP loan?38
No. Hedge funds and private equity firms are primarily engaged in investment or
speculation, and such businesses are therefore ineligible to receive a PPP loan.
3. Affiliation rules generally
a. Are affiliates considered together for purposes of determining eligibility?39
In most cases, a borrower will be considered together with its affiliates for purposes of
determining eligibility for the PPP.40 Under SBA rules, entities may be considered
38
This subsection was originally published at 85 Fed. Reg. 23450, subsection III.2.a. (April 28, 2020) and has been
modified for readability.
39
The text of this subsection was originally published at 85 Fed. Reg. 20817 (April 15, 2020).
40
Paragraph 7(a)(36)(D)(iv) of the Small Business Act (15 U.S.C. 636(a)(36)(D)(iv), as added by the CARES Act
and amended by the Economic Aid Act, waives the affiliation rules contained in § 121.103 for (1) any business
concern with not more than 500 employees that, as of the date on which the loan is disbursed, is assigned a North
American Industry Classification System code beginning with 72; (2) any business concern operating as a franchise
that is assigned a franchise identifier code by the Administration; (3) any business concern that receives financial
assistance from a company licensed under section 301 of the Small Business Investment Act of 1958 (15 U.S.C.
681); and (4)(a) any business concern (including any station which broadcasts pursuant to a license granted by the
Federal Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. 301 et seq.)
without regard for whether such a station is a concern as defined in section 121.105 of title 13, Code of Federal
Regulations, or any successor thereto) that employs not more than 500 employees, or the size standard established
by the Administrator for the North American Industry Classification System code applicable to the business
concern, per physical location of such business concern and is majority owned or controlled by a business concern
that is assigned a North American Industry Classification System code beginning with 511110 or 5151; or (b) any
nonprofit organization that is assigned a North American Industry Classification System code beginning with 5151.
27
affiliates based on factors including but not limited to stock ownership, overlapping
management,41 and identity of interest. See 13 CFR 121.301(f).
b. How do SBA’s affiliation rules affect my eligibility and apply to me under the PPP?42
An entity generally is eligible for the PPP if it, combined with its affiliates, (i) is a small
business as defined in section 3 of the Small Business Act (15 U.S.C. 632), (ii) (1) has
500 or fewer employees43 or is a business that operates in a certain industry and meets
applicable SBA employee-based size standards for that industry, if higher, and (2) is a
tax-exempt nonprofit organization described in section 501(c)(3) of the Internal Revenue
Code (IRC), a housing cooperative, a tax-exempt veterans organization described in
section 501(c)(19) of the IRC, a Tribal business concern described in section 31(b)(2)(C)
of the Small Business Act, a section 501(c)(6) organization, a destination marketing
organization, or any other business concern, or (iii) has 500 or fewer employees per
location (or an applicable SBA employee-based size standard for that industry, if higher)
and is either majority owned or controlled by a NAICS code 511110 or 5151 business or
is a nonprofit public broadcasting entity with a trade or business under NAICS code
This interim final rule has no effect on these statutory waivers, which remain in full force and effect. As a result, the
affiliation rules contained in section 121.301 also do not apply to these types of entities. In addition, paragraph
7(a)(36)(D) of the Small Business Act (15 U.S.C. 636(a)(36)(D)), as amended by section 342 of the Economic Aid
Act states that, with respect to a business concern made eligible under paragraph 7(a)(36)(D)(iii)(II) or (iv)(IV)
(certain news organizations), the Administrator shall not consider whether any affiliated entity, which for purposes
of this subclause shall include any entity that owns or controls such business concern, is an issuer.
41
In order to help potential borrowers identify other businesses with which they may be deemed to be affiliated
under the common management standard, the Borrower Application Form, SBA Form 2483, released on April 2,
2020, requires applicants to list other businesses with which they have common management (including under a
management agreement). The information supplied by the applicant in response to that information request should
be used by applicants as they assess whether they have affiliates that should be included in their number of
employees reported on SBA Form 2483.
42
The text of this subsection was originally published at 85 Fed. Reg. 20817 (April 15, 2020) and has been modified
to conform to the Economic Aid Act.
43
For housing cooperatives, section 501(c)(6) organizations, and destination marketing organizations, the applicable
size standard is not more than 300 employees.
28
511110 or 5151. Prior to the CARES Act, the nonprofit organizations listed above were
not eligible for SBA Business Loan Programs under section 7(a) of the Small Business
Act; only for-profit small business concerns were eligible. The CARES Act made such
nonprofit organizations not only eligible for the PPP, but also subjected them to SBA’s
affiliation rules. As amended, section 7(a) of the Small Business Act (15 U.S.C. 636(a))
now provides that the provisions applicable to affiliations under 13 CFR 121.103 apply
with respect to nonprofit organizations, housing cooperatives, and veterans organizations
in the same manner as with respect to small business concerns. However, the detailed
affiliation standards contained in § 121.103 currently do not apply to PPP borrowers,
because § 121.103(a)(8) provides that applicants in SBA’s Business Loan Programs
(which include the PPP) are subject to the affiliation rules contained in 13 CFR 121.301.
c. Faith-Based Organizations44
This rule exempts otherwise qualified faith-based organizations from the SBA’s
affiliation rules, including those set forth in 13 CFR part 121, where the application of the
affiliation rules would substantially burden those organizations’ religious exercise. For
the reasons described in 85 Fed. Reg. 20817, the SBA’s affiliation rules, including those
set forth in 13 CFR part 121, do not apply to the relationship of any church, convention
or association of churches, or other faith-based organization or entity to any other person,
group, organization, or entity that is based on a sincere religious teaching or belief or
otherwise constitutes a part of the exercise of religion. This includes any relationship to a
parent or subsidiary and other applicable aspects of organizational structure or form. A
44
The text of this subsection was originally published at 85 Fed. Reg. 20817 (April 15, 2020) and has been modified
for readability.
29
faith-based organization seeking loans under this program may rely on a reasonable, good
faith interpretation in determining whether its relationship to any other person, group,
organization, or entity is exempt from the affiliation rules under this provision, and SBA
will not assess, and will not require participating lenders to assess, the reasonableness of
the faith-based organization’s determination.
d. Do the SBA affiliation rules prohibit a portfolio company of a private equity fund from
being eligible for a PPP loan?45
Borrowers must apply the affiliation rules that appear in 13 CFR 121.301(f), as set forth
in the Second PPP Interim Final Rule (85 FR 20817). The affiliation rules apply to
private equity-owned businesses in the same manner as any other business subject to
outside ownership or control.46 However, in addition to applying any applicable
affiliation rules, all borrowers should carefully review the required certification on the
Paycheck Protection Program Borrower Application Form (SBA Form 2483) stating that
“[c]urrent economic uncertainty makes this loan request necessary to support the ongoing
operations of the Applicant.”
e. Does participation in an employee stock ownership plan (ESOP) trigger application of
the affiliation rules?47
No. For purposes of the PPP, a business’s participation in an ESOP (as defined in 15
U.S.C. 632(q)(6)) does not result in an affiliation between the business and the ESOP.
45
This subsection was originally published at 85 Fed. Reg. 23450, subsection III.2.b. (April 28, 2020).
46
However, the CARES Act waives the affiliation rules if the borrower receives financial assistance from an SBA-
licensed Small Business Investment Company (SBIC) in any amount. This includes any type of financing listed in
13 CFR 107.50, such as loans, debt with equity features, equity, and guarantees. Affiliation is waived even if the
borrower has investment from other non-SBIC investors.
47
This subsection was originally published at 85 Fed. Reg. 23450, section III.3. (April 28, 2020) and has been
modified for readability.
30
4. I have determined that I am eligible. How much can I borrow?48
Under the PPP, the maximum loan amount for First Draw PPP Loans is the lesser of $10
million or an amount that you will calculate using a payroll-based formula authorized by
the Act, as explained below.49 PPP loans approved in 2020 used 2019 or the 1-year
before the date on which the loan is made to calculate payroll costs for purposes of
calculating the maximum loan amount. Borrowers who apply for PPP loans 2021 and
who are not self-employed (including sole proprietorships and independent contractors)
are also permitted to use the precise 1-year period before the date on which the loan is
made to calculate payroll costs if they choose not to use 2019 or 2020. Since most
borrowers will use 2019 or 2020 the rule text refers only to 2019 or 2020 for simplicity
and readability.
a. How do I calculate the maximum amount I can borrow?50
The following methodology, which is one of the methodologies authorized by the Act,
will be most useful for many applicants.
i. Step 1: Aggregate payroll costs (defined in detail below in subsections 4.g. and
4.h.) from 2019 or 2020 for employees whose principal place of residence is the
United States.
48
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.d. (April 15, 2020) and has been
modified to conform to additional interim final rules or guidance and the Economic Aid Act.
49
See subsection 4.d. for maximum loan amount applicable to certain farmers and ranchers. For the maximum loan
amount for Second Draw PPP Loans, see the the interim final rule on Second Draw PPP Loans that is being
published separately.
50
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.d. (April 15, 2020) and has been
modified to conform to additional rules or guidance and the Economic Aid Act.
31
ii. Step 2: Subtract any compensation paid to an employee 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.51
iii. Step 3: Calculate average monthly payroll costs (divide the amount from Step 2
by 12).
iv. Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
v. Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL)
made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do
not include the amount of any “advance” under an EIDL COVID-19 loan
(because it does not have to be repaid).
The examples below illustrate this methodology.
i. Example 1 – No employees make more than $100,000
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Maximum loan amount is $25,000
ii. Example 2 – Some employees make more than $100,000
Annual payroll: $1,500,000
Subtract compensation amounts in excess of an annual salary of $100,000:
$1,200,000
Average monthly qualifying payroll: $100,000
Multiply by 2.5 = $250,000
51
See subsection 4.j for treatment of amounts paid to independent contractors.
32
Maximum loan amount is $250,000
iii. Example 3 – No employees make more than $100,000, outstanding EIDL loan of
$10,000.
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Add EIDL loan of $10,000 = $35,000
Maximum loan amount is $35,000
iv. Example 4 – Some employees make more than $100,000, outstanding EIDL loan
of $10,000
Annual payroll: $1,500,000
Subtract compensation amounts in excess of an annual salary of $100,000:
$1,200,000
Average monthly qualifying payroll: $100,000
Multiply by 2.5 = $250,000
Add EIDL loan of $10,000 = $260,000
Maximum loan amount is $260,000
You must provide your Form 941 (or other tax forms containing similar information) and
state quarterly wage unemployment insurance tax reporting forms from each quarter in
2019 or 2020 (whichever you used to calculate loan amount), or equivalent payroll
processor records, along with evidence of any retirement and health insurance
contributions. A payroll statement or similar documentation from the pay period that
33
covered February 15, 2020 must be provided to establish you were in operation on
February 15, 2020.52
b. I have income from self-employment and file a Form 1040, Schedule C, how do I calculate
the maximum amount I can borrow and what documentation is required?53
How you calculate your maximum loan amount depends upon whether or not you employ
other individuals. If you have no employees, the following methodology should be used
to calculate your maximum loan amount:
i. Step 1: Find your 2019 or 2020 IRS Form 1040 Schedule C line 31 net profit
amount (if you are using 2020 to calculate payroll costs and have not yet filed a
2020 return, fill it out and compute the value). If this amount is over $100,000,
reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP
loan.
ii. Step 2: Calculate the average monthly net profit amount (divide the amount from
Step 1 by 12).
iii. Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.
iv. Step 4: Add the outstanding amount of any Economic Injury Disaster Loan
(EIDL) made between January 31, 2020 and April 3, 2020 that you seek to
refinance. Do not include the amount of any advance under an EIDL COVID-19
loan (because it does not have to be repaid).
52
This subsection clarifies the documentation that must be submitted with an applicant’s loan application to
substantiate the borrower’s payroll costs. This requirement applies to loans made after December 27, 2020. For
documentation requirements for PPP loans made before December 27, 2020, see 85 Fed. Reg. 20811, subsection
III.1.e. (April 15, 2020).
53
This subsection was originally published at 85 Fed. Reg. 21747, subsection III.1.b. (April 20, 2020) and has been
modified to conform to additional rules or guidance and the Economic Aid Act.
34
You must provide the 2019 or 2020 (whichever you used to calculate loan amount) Form
1040 Schedule C with your PPP loan application to substantiate the applied-for PPP loan
amount and a 2019 or 2020 (whichever you used to calculate loan amount) IRS Form
1099-MISC detailing nonemployee compensation received (box 7), invoice, bank
statement, or book of record that establishes you are self-employed. If using 2020 to
calculate loan amount, this is required regardless of whether you have filed a 2020 tax
return with the IRS. You must provide a 2020 invoice, bank statement, or book of record
to establish you were in operation on or around February 15, 2020.
If you have employees, the following methodology should be used to calculate your
maximum loan amount:
i. Step 1: Compute 2019 or 2020 payroll (using the same year for all items) by
adding the following:
a. Your 2019 or 2020 Form 1040 Schedule C line 31 net profit amount (if you
are using 2020 and have not yet filed a 2020 return, fill it out and compute the
value), up to $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, if this amount is over $100,000, reduce it to $100,000, if this
amount is less than zero, set this amount at zero;
b. 2019 or 2020 gross wages and tips paid to your employees whose principal
place of residence is in the United States computed using 2019 or 2020 IRS
Form 941 Taxable Medicare wages & tips (line 5c- column 1) from each
quarter plus any pre-tax employee contributions for health insurance or other
fringe benefits excluded from Taxable Medicare wages & tips; subtract any
35
amounts paid to any individual employee 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 and any amounts
paid to any employee whose principal place of residence is outside the United
States; and
c. 2019 or 2020 employer contributions to employee group health, life,
disability, vision and dental insurance (portion of IRS Form 1040 Schedule C
line 14 attributable to those contributions); retirement contributions (Form
1040 Schedule C line 19), and state and local taxes assessed on employee
compensation (primarily under state laws commonly referred to as the State
Unemployment Tax Act or SUTA from state quarterly wage reporting forms).
ii. Step 2: Calculate the average monthly amount (divide the amount from Step 1 by
12).
iii. Step 3: Multiply the average monthly amount from Step 2 by 2.5.
iv. Step 4: Add the outstanding amount of any EIDL made between January 31, 2020
and April 3, 2020 that you seek to refinance. Do not include the amount of any
advance under an EIDL COVID-19 loan (because it does not have to be repaid).
You must supply your 2019 or 2020 (whichever you used to calculate loan amount) Form
1040 Schedule C, Form 941 (or other tax forms or equivalent payroll processor records
containing similar information) and state quarterly wage unemployment insurance tax
reporting forms from each quarter in 2019 or 2020 (whichever you used to calculate loan
amount) or equivalent payroll processor records, along with evidence of any retirement
and health insurance contributions, if applicable. A payroll statement or similar
36
documentation from the pay period that covered February 15, 2020 must be provided to
establish you were in operation on February 15, 2020.
c. How does a seasonal employer calculate the maximum PPP loan amount?54
As defined by section 315 of the Economic Aid Act, a borrower is a seasonal employer if
it does not operate for more than 7 months in any calendar year or, during the preceding
calendar year, it had gross receipts for any 6 months of that year that were not more than
33.33 percent of the gross receipts for the other 6 months of that year. Under section 336
of the Economic Aid Act, a seasonal employer must determine its maximum loan amount
for purposes of the PPP by using the employer’s average total monthly payments for
payroll for any 12-week period selected by the seasonal employer beginning February 15,
2019, and ending February 15, 2020.
d. How do farmers and ranchers calculate the maximum PPP loan amount?55
How you calculate your maximum loan amount depends upon whether you employ other
individuals. If you have no employees, the following methodology should be used to
calculate your maximum loan amount:
54
This subsection has been added to conform to section 336 of the Economic Aid Act. Except for loans made
pursuant to section 7(a)(36) of the Small Business Act for which SBA has remitted a loan forgiveness payment to
the lender before December 27, 2020, it is effective as if included in the CARES Act and applies to any loan made
before, on, or after December 27, 2020, including forgiveness of such a loan. Previous guidance issued for seasonal
employers stated as follows: “Under section 1102 of the CARES Act, a seasonal employer may determine its
maximum loan amount for purposes of the PPP by reference to the employer’ average total monthly payments for
payroll ‘the 12-week period beginning February 15, 2019, or at the election of the eligible [borrower], March 1,
2019, and ending June 30, 2019.’ Under this interim final rule issued pursuant to section 1109 of the Act, a seasonal
employer may alternatively elect to determine its maximum loan amount as the average total monthly payments for
payroll during any consecutive 12-week period between May 1, 2019 and September 15, 2019.” 85 Fed. Reg. 23917
(April 30, 2020).
55
This subsection has been added to conform to section 313 of the Economic Aid Act. This provision applies to a
farmer or rancher who (1) operates as a sole proprietorship, an independent contractor, or is an eligible self-
employed individual; (2) reports farm income or expenses on a Schedule F (or any equivalent successor schedule);
and (3) was in business as of February 15, 2020. This provision is effective as if included in the CARES Act and
applies to any loan made before, on, or after December 27, 2020, unless SBA has remitted a loan forgiveness
payment to the lender on the PPP loan.
37
i. Step 1: Find your 2019 or 2020 IRS Form 1040 Schedule F line 9 gross income (if
you are using 2020 and you have not yet filed a 2020 return, fill it out and
compute the value). If this amount is over $100,000, reduce it to $100,000. If
this amount is zero or less, you are not eligible for a PPP loan.
ii. Step 2: Divide the amount from Step 1 by 12.
iii. Step 3: Multiply the average monthly gross income amount from Step 2 by 2.5.
iv. Step 4: Add the outstanding amount of any Economic Injury Disaster Loan
(EIDL) made between January 31, 2020 and ending on April 3, 2020 that you
seek to refinance. Do not include the amount of any advance under an EIDL
COVID-19 loan (because it does not have to be repaid).
You must provide the 2019 or 2020 (whichever you used to calculate loan amount) Form
1040 Schedule F with your PPP loan application to substantiate the applied-for PPP loan
amount and a 2019 or 2020 (whichever you used to calculate loan amount) IRS Form
1099-MISC detailing nonemployee compensation received (box 7), invoice, bank
statement, or book of record that establishes you are self-employed. You must provide a
2020 invoice, bank statement, or book of record to establish you were in operation on or
around February 15, 2020.
If you have employees, the following methodology should be used to calculate your
maximum loan amount:
i. Step 1: Compute 2019 or 2020 payroll (using the same year for all items) by
adding the following:
a. The difference between your 2019 or 2020 Form 1040 Schedule F line 9 gross
income amount (if you are using 2020 and you have not yet filed a 2020
38
return, fill it out and compute the value), and the sum of Schedule F lines 15,
22, 23, and 37, up to $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, if this amount is over $100,000, reduce it to $100,000, if
this amount is less than zero, set this amount at zero;56
b. 2019 or 2020 gross wages and tips paid to your employees whose principal
place of residence is in the United States computed using 2019 or 2020 IRS
Form 941 Taxable Medicare wages & tips (line 5c- column 1) from each
quarter plus any pre-tax employee contributions for health insurance or other
fringe benefits excluded from Taxable Medicare wages & tips; subtract any
amounts paid to any individual employee 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 and any amounts
paid to any employee whose principal place of residence is outside the United
States; and
c. 2019 or 2020 employer contributions for employee group health, life,
disability, vision and dental insurance (portion of IRS Form 1040 Schedule F
line 15 attributable to those contributions), employer contributions for
employee retirement contributions (Form 1040 Schedule F line 15), and state
and local taxes assessed on employers for employee compensation (primarily
56
Any employee payroll costs should be subtracted from the farmer’s or rancher’s gross income to avoid double-
counting amounts that represent pay to the employees of the farmer or rancher.
39
under state laws commonly referred to as the State Unemployment Tax Act or
SUTA from state quarterly wage reporting forms).
ii. Step 2: Calculate the average monthly amount (divide the amount from Step 1 by
12).
iii. Step 3: Multiply the average monthly amount from Step 2 by 2.5.
iv. Step 4: Add the outstanding amount of any EIDL made between January 31, 2020
and April 3, 2020 that you seek to refinance. Do not include the amount of any
advance under an EIDL COVID-19 loan (because it does not have to be repaid).
You must supply your 2019 or 2020 (whichever you used to calculate loan amount) Form
1040 Schedule F, Form 941 (or other tax forms or equivalent payroll processor records
containing similar information) and state quarterly wage unemployment insurance tax
reporting forms from each quarter in 2019 or 2020 (whichever you used to calculate loan
amount) or equivalent payroll processor records, along with evidence of any retirement
and health insurance contributions, if applicable. A payroll statement or similar
documentation from the pay period that covered February 15, 2020 must be provided to
establish you were in operation on February 15, 2020.
A farmer or rancher who received a PPP loan before December 27, 2020 may request a
recalculation of the maximum loan amount based on the formula described above
regarding gross income, if doing so would result in a larger covered loan amount and may
receive an increase in its PPP loan based on the recalculation.
e. How do partnerships calculate the maximum loan amount?
The following methodology should be used to calculate the maximum amount that
partnerships can borrow:
40
(i) Step 1: Compute 2019 or 2020 payroll (using the same year for all items)
by adding (1) net earnings from self-employment of individual general
partners in 2019 or 2020, as reported on IRS Form 1065 K-1, reduced by
section 179 expense deduction claimed, unreimbursed partnership
expenses claimed, and depletion claimed on oil and gas properties,
multiplied by 0.9235,57 that is not more than $100,000 per partner; (2)
2019 or 2020 gross wages and tips paid to your employees whose
principal place of residence is in the United States, if any, which can be
computed using 2019 or 2020 IRS Form 941 Taxable Medicare wages and
tips (line 5c-column 1) from each quarter plus any pre-tax employee
contributions for health insurance or other fringe benefits excluded from
Taxable Medicare wages and tips, subtracting any amounts paid to any
individual employee in excess of $100,000 and any amounts paid to any
employee whose principal place of residence is outside the U.S; (3) 2019
or 2020 employer contributions for employee group health, life, disability,
vision and dental insurance, if any (portion of IRS Form 1065 line 19
attributable to those contributions); (4) 2019 or 2020 employer
contributions to employee retirement plans, if any (IRS Form 1065 line
18); and (5) 2019 or 2020 employer state and local taxes assessed on
employee compensation, primarily state unemployment insurance tax
(from state quarterly wage reporting forms), if any.
57
This treatment follows the computation of self-employment tax from IRS Form 1040 Schedule SE Section A line
4 and removes the “employer” share of self-employment tax, consistent with how payroll costs for employees in the
partnership are determined.
41
(ii) Step 2: Calculate the average monthly payroll costs (divide the amount
from Step1 by 12).
(iii) Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.
(iv) Step 4: Add any outstanding amount of any EIDL made between January
31, 2020 and April 3, 2020 that you seek to refinance. Do not include the
amount of any advance under an EIDL COVID-19 loan (because it does
not have to be repaid).
You must supply 2019 or 2020 (whichever you used to calculate loan amount) IRS Form
1065 (including K-1s) and other relevant supporting documentation if the partnership has
employees, including the 2019 or 2020 (whichever you used to calculate loan amount)
IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from
each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements)
along with records of any retirement or health insurance contributions. If the partnership
has employees, a payroll statement or similar documentation from the pay period that
covered February 15, 2020 must be provided to establish the partnership was in operation
and had employees on that date. If the partnership has no employees, an invoice, bank
statement, or book of record establishing the partnership was in operation on February
15, 2020 must instead be provided
f. Can a single corporate group receive unlimited PPP loans?58
No. To preserve the limited resources available to the PPP program, and in light of the
previous lapse of PPP appropriations and the high demand for PPP loans, businesses that
are part of a single corporate group shall in no event receive more than $20,000,000 of
58
This subsection was originally published at 85 Fed. Reg. 26324, subsection III.1. (May 4, 2020).
42
PPP loans in the aggregate.59 For purposes of this limit, businesses are part of a single
corporate group if they are majority owned, directly or indirectly, by a common parent.
It is the responsibility of an applicant for a PPP loan to notify the lender if the applicant
has applied for or received PPP loans in excess of the amount permitted by this interim
final rule and withdraw or request cancellation of any pending PPP loan application or
approved PPP loan not in compliance with the limitation set forth in this rule. Failure by
the applicant to do so will be regarded as a use of PPP funds for unauthorized purposes,
and the loan will not be eligible for forgiveness. A lender may rely on an applicant’s
representation concerning the applicant’s compliance with this limitation.
The Administrator, in consultation with the Secretary, determined that limiting the
amount of PPP loans that a single corporate group may receive will promote the
availability of PPP loans to the largest possible number of borrowers, consistent with the
CARES Act. The Administrator has concluded that a limitation of $20,000,000 strikes an
appropriate balance between broad availability of PPP loans and program resource
constraints.
SBA’s affiliation rules, which relate to an applicant’s eligibility for PPP loans, and any
waiver of those rules under the CARES Act, continue to apply independent of this
limitation. Businesses are subject to this limitation even if the businesses are eligible for
59
The Administrator has authority to issue “such rules and regulations as [the Administrator] deems necessary to
carry out the authority vested in [her] by or pursuant to” 15 U.S.C. Chapter 14A, including authorities established
under section 1102 of the CARES Act. Section 1102 provides that the Administrator “may” guarantee loans under
the terms and conditions set forth in section 7(a) of the Small Business Act, and those conditions specify a
“maximum” – but not a minimum – loan amount. See 15 U.S.C. 636(a)(36)(B), (E); see also CARES Act section
1106(k) (authorizing SBA to issue regulations to govern loan forgiveness). To preserve finite appropriations for
PPP loans and ensure broad access for eligible borrowers, the Administrator, in consultation with the Secretary, has
determined that an aggregate limitation on loans to a single corporate group is necessary and appropriate.
43
the waiver-of-affiliation provision under the CARES Act or are otherwise not considered
to be affiliates under SBA’s affiliation rules.60
This rule has no effect on lender obligations required to obtain an SBA guarantee for PPP
loans.
g. What qualifies as “payroll costs?”61
Payroll costs consist of compensation to employees (whose principal place of residence is
the United States) in the form of salary, wages, commissions, or similar compensation;
cash tips or the equivalent (based on employer records of past tips or, in the absence of
such records, a reasonable, good-faith employer estimate of such tips); payment for
vacation, parental, family, medical, or sick leave; allowance for separation or dismissal;
payment for the provision of employee benefits consisting of group health care or group
life, disability, vision, or dental insurance,62 including insurance premiums, and
retirement; payment of state and local taxes assessed on compensation of employees; and
for an independent contractor or sole proprietor, wages, commissions, income, or net
earnings from self-employment, or similar compensation.
h. Is there anything that is expressly excluded from the definition of payroll costs?63
Yes. The Act expressly excludes the following:
60
See Section 7(a)(36)(D)(iv) of the Small Business Act (15 U.S.C. 636(a)(36)(D)(iv), as added by the CARES Act;
13 CFR 121.103(b).
61
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.f. (April 15, 2020) and has been
modified to conform to the Economic Aid Act.
62
This provision has been modified to conform to section 308 of the Economic Aid Act. This revision is effective as
if included in the CARES Act and applies to any loan made before, on, or after December 27, 2020, including
forgiveness of such a loan.
63
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.g. (April 15, 2020) and has been
modified to conform to section 344 the Economic Aid Act.
44
i. Any compensation of an employee whose principal place of residence is outside
of the United States;
ii. The compensation of an individual employee 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;
iii. Federal employment taxes imposed or withheld during the applicable period,
including the employee’s and employer’s share of FICA (Federal Insurance
Contributions Act) and Railroad Retirement Act taxes, and income taxes required
to be withheld from employees; and
iv. 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).
i. May fishing boat owners include payroll costs in their PPP loan applications that are
attributable to crewmembers described in section 3121(b)(20) of the Internal Revenue
Code?64
Yes. A fishing boat owner may include compensation reported on Box 5 of IRS Form
1099-MISC and paid to a crewmember described in section 3121(b)(20) of the Code, up
to $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, as a payroll cost in its PPP
loan application.
j. Do independent contractors count as employees for purposes of PPP loan calculations?65
64
This subsection was originally published at 85 Fed. Reg. 39066, subsection III.1. (June 30, 2020) and has been
modified to conform to section 344 the Economic Aid Act and for readability.
65
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.h. (April 15, 2020).
45
No, independent contractors have the ability to apply for a PPP loan on their own so they
do not count for purposes of a borrower’s PPP loan calculation.66
k. Do student workers count when determining the number of employees for PPP loan
eligibility?67
Yes. Student workers generally count as employees, unless (a) the applicant is an
institution of higher education, as defined in the Department of Education’s Federal
Work-Study regulations, 34 C.F.R. 675.2, and (b) the student worker’s services are
performed as part of a Federal Work-Study Program (as defined in those regulations68) or
a substantially similar program of a State or political subdivision thereof. Institutions of
higher education must exclude work study students when determining the number of
employees for PPP loan eligibility, and must also exclude payroll costs for work study
students from the calculation of payroll costs used to determine their PPP loan amount.
5. What is the interest rate on a PPP loan?69
The interest rate will be 100 basis points or one percent, calculated on a non-
compounding, non-adjustable basis.70
66
See subsection 4.i. regarding fishing boat owners including payroll costs for their crewmembers in the calculation
of the PPP loan amount.
67
This subsection was originally published at 85 Fed. Reg. 27287, section III.2. (May 8, 2020) and has been
modified for readability.
68
The Department of Education’s Federal Work-Study Programs described at 34 CFR Part 675 are (1) the Federal
Work-Study Program, (2) the Job Location and Development Program, and (3) Work Colleges Program.
69
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.i. (April 15, 2020) and has been
modified to conform to additional interim final rules or guidance and the Economic Aid Act.
70
Revised to conform to section 339 of the Economic Aid Act. The revision applies to PPP loans made on or after
December 27, 2020, but may apply with respect to a PPP loan made before that date upon the mutual agreement of
the lender and the borrower. A one percent interest rate provides low cost funds to borrowers to meet eligible
payroll costs and other eligible expenses during this temporary period of economic dislocation caused by the
coronavirus. Second, for lenders, the 100 basis points offers an attractive interest rate relative to the cost of funding
for comparable maturities.
46
6. What will be the maturity date on a PPP loan?71
The maturity is five years.
7. Can I apply for more than one First Draw PPP Loan?72
No. Except as set forth in subsection D.8, the Administrator, in consultation with the
Secretary, determined that no eligible borrower may receive more than one First Draw
PPP Loan. This means that if you apply for a PPP loan you should consider applying for
the maximum amount. Any borrower who received a PPP loan in 2020 received a First
Draw PPP Loan and is not eligible to receive another First Draw PPP Loan, but may be
eligible for a second draw PPP loan.73
8. Can I use e-signatures or e-consents if a borrower has multiple owners?74
Yes, e-signature or e-consents can be used regardless of the number of owners.
9. When will I have to begin paying principal and interest on my PPP loan?75
If you submit to your lender a loan forgiveness application within 10 months after the end
of your loan forgiveness covered period, you will not have to make any payments of
principal or interest on your loan before the date on which SBA remits the loan
forgiveness amount on your loan to your lender (or notifies your lender that no loan
forgiveness is allowed).
71
This subsection was originally published at 85 Fed. Reg. 36308, subsection III.1.b. (June 16, 2020) and has been
modified for readability.
72
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.i. (“Can I apply for more than
one PPP loan?”) (April 15, 2020) and has been modified to conform to the Economic Aid Act and for readability.
PPP borrowers may be eligible for a loan under section 7(a)(37) of the Small Business Act, “Paycheck Protection
Program Second Draw Loans,” see interim final rule on Second Draw PPP Loans that is being published separately.
73
See interim final rule on Second Draw PPP Loans for eligibility criteria for Second Draw PPP Loans, which is
being published separately.
74
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.l. (April 15, 2020).
75
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.n. (April 15, 2020), as amended
by 85 Fed. Reg. 36038 (June 16, 2020), and has been modified to conform to the Economic Aid Act.
47
Your “loan forgiveness covered period” is 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. Your lender
must notify you of remittance by SBA of the loan forgiveness amount (or notify you that
SBA determined that no loan forgiveness is allowed) and the date your first payment is
due. Interest continues to accrue during the deferment period.
If you do not submit to your lender a loan forgiveness application within 10 months after
the end of your loan forgiveness covered period, you must begin paying principal and
interest after that period. For example, if a borrower’s PPP loan is disbursed on January
25, 2021, the 24-week period ends on July 12, 2021. If the borrower does not submit a
loan forgiveness application to its lender by May 12, 2022, the borrower must begin
making payments on or after May 12, 2022.
10. What forms do I need and how do I submit an application for a PPP loan?76
The applicant must submit Paycheck Protection Program Borrower Application Form
(SBA Form 2483), or lender’s equivalent form, and payroll documentation, as described
above. The lender must submit SBA Form 2484, Paycheck Protection Program Lender’s
Application for 7(a) Loan Guaranty, electronically in accordance with program
requirements and maintain the forms and supporting documentation in its files.
11. How can PPP loans be used?77
a. The proceeds of a PPP loan are to be used for:
76
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.q. (April 15, 2020).
77
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.r. (April 15, 2020), as amended
by 85 Fed. Reg. 36308 (June 16, 2020) and has been modified to conform to the Economic Aid Act.
48
i. payroll costs (as defined in the CARES Act, Economic Aid Act and this interim
final rule);
ii. costs related to the continuation of group health care, life, disability, vision, or
dental benefits during periods of paid sick, medical, or family leave, and group
health care, life, disability, vision, or dental insurance premiums;
iii. mortgage interest payments (but not mortgage prepayments or principal
payments);
iv. rent payments;
v. utility payments;
vi. interest payments on any other debt obligations that were incurred before
February 15, 2020;
vii. refinancing an SBA EIDL loan made between January 31, 2020 and April 3,
2020;78
viii. covered operations expenditures (payments for any business software or cloud
computing service that facilitates business operations, product or service delivery,
the processing, payment, or tracking of payroll expenses, human resources, sales
and billing functions, or accounting or tracking of supplies, inventory, records and
expenses);79
78
Under paragraph 7(a)(36)(Q) of the Small Business Act, as amended by section 341 of the Economic Aid Act, an
EIDL loan used for purposes other than paying payroll costs and other eligible PPP expenditures is not considered a
duplication of the assistance available under the PPP.
79
Items viii. through xi. were added to conform to section 304 of the Economic Aid Act. These provisions are
effective as if included in the CARES Act and apply to any loan made before, on, or after December 27, 2020,
including forgiveness of such loan, unless SBA has remitted a loan forgiveness payment to the lender on the PPP
loan. Section 1106 of the CARES Act (15 U.S.C. 9005) was redesignated as section 7A, transferred to the Small
Business Act (15 U.S.C. 631 et seq.), and inserted so as to appear after section 7 of the Small Business Act (15
U.S.C. 636) in section 304(b) of the Economic Aid Act.
49
ix. covered property damage costs (costs related to property damage and vandalism or
looting due to public disturbances that occurred during 2020 that was not covered
by insurance or other compensation);
x. covered supplier costs (expenditures made by a borrower to a supplier of goods for
the supply of goods that—(A) are essential to the operations of the borrower at the
time at which the expenditure is made; and (B) is made pursuant to a contract,
order, or purchase order—(i) in effect at any time before the covered period with
respect to the applicable covered loan; or (ii) with respect to perishable goods, in
effect before or at any time during the covered period with respect to the
applicable covered loan); and
xi. covered worker protection expenditures ((A) operating or a capital expenditures
to facilitate the adaptation of the business activities of an entity to comply with
requirements established or guidance issued by the Department of Health and
Human Services, the Centers for Disease Control, or the Occupational Safety and
Health Administration, or any equivalent requirements established or guidance
issued by a State or local government, during the period beginning on March 1,
2020 and ending the date on which the national emergency with respect to the
COVID–19 expires related to the maintenance of standards for sanitation, social
distancing, or any other worker or customer safety requirement related to
COVID–19; (B) such expenditures may include—(i) the purchase, maintenance,
or renovation of assets that create or expand—(I) a drive-through window facility;
(II) an indoor, outdoor, or combined air or air pressure ventilation or filtration
system; (III) a physical barrier such as a sneeze guard; (IV) an expansion of
50
additional indoor, outdoor, or combined business space; (V) an onsite or offsite
health screening capability; or (VI) other assets relating to the compliance with
the requirements or guidance described in subparagraph (A), as determined by the
Administrator in consultation with the Secretary of Health and Human Services
and the Secretary of Labor; and (ii) the purchase of—(I) covered materials
described in section 328.103(a) of title 44, Code of Federal Regulations, or any
successor regulation; (II) particulate filtering facepiece respirators approved by
the National Institute for Occupational Safety and Health, including those
approved only for emergency use authorization; or (III) other kinds of personal
protective equipment, as determined by the Administrator in consultation with the
Secretary of Health and Human Services and the Secretary of Labor; and (C) such
expenditures do not include residential real property or intangible property).
At least 60 percent of the PPP loan proceeds shall be used for payroll costs. For purposes
of determining the percentage of use of proceeds for payroll costs, the amount of any
EIDL refinanced will be included. For purposes of loan forgiveness, however, the
borrower will have to document the proceeds used for payroll costs in order to determine
the amount of forgiveness. While the Act provides that PPP loan proceeds may be used
for the purposes listed above and for other allowable uses described in section 7(a) of the
Small Business Act (15 U.S.C. 636(a)), the Administrator believes that finite
appropriations and the structure of the Act warrant a requirement that borrowers use a
substantial portion of the loan proceeds for payroll costs, consistent with Congress’
overarching goal of keeping workers paid and employed. This percentage is consistent
with the limitation on the forgiveness amount set forth in the Flexibility Act. This
51
limitation on use of the loan funds will help to ensure that the finite appropriations
available for these loans are directed toward payroll protection, as each loan that is issued
depletes the appropriation, regardless of whether portions of the loan are later forgiven.
b. How can PPP loans be used by individuals with income from self-employment who file a
Form 1040, Schedule C?80
The proceeds of a PPP loan are to be used for the following.
i. Owner compensation replacement, calculated based on 2019 or 2020 (using the
same year that was used to calculate the loan amount) net profit as described in
subsection 4.b.
ii. Employee payroll costs (as defined in this interim final rule) for employees whose
principal place of residence is in the United States, if you have employees.
iii. Mortgage interest payments (but not mortgage prepayments or principal
payments) on any business mortgage obligation on real or personal property (e.g.,
the interest on your mortgage for the warehouse you purchased to store business
equipment or the interest on an auto loan for a vehicle you use to perform your
business), business rent payments (e.g., the warehouse where you store business
equipment or the vehicle you use to perform your business), and business utility
payments (e.g., the cost of electricity in the warehouse you rent or gas you use
driving your business vehicle). You must have claimed or be entitled to claim a
deduction for such expenses on your 2019 or 2020 (whichever you used to
calculate loan amount) Form 1040 Schedule C for them to be a permissible use.
80
This subsection was originally published at 85 Fed. Reg. 21747, subsection III.1.d. (April 20, 2020) and has been
modified to conform to the Economic Aid Act.
52
For example, if you did not claim or are not entitled to claim utilities expenses on
your 2019 or 2020 Form 1040 Schedule C, you cannot use the proceeds for
utilities.
iv. Interest payments on any other debt obligations that were incurred before
February 15, 2020 (such amounts are not eligible for PPP loan forgiveness).
v. Refinancing an SBA EIDL loan made between January 31, 2020 and April 3,
2020 (maturity will be reset to PPP’s maturity of two years for PPP loans made
before June 5, 2020 unless the borrower and lender mutually agree to extend the
maturity of such loans to five years, or PPP’s maturity of five years for PPP loans
made on or after June 5).81
vi. Covered operations expenditures, as defined in section 7A(a) of the Small
Business Act, to the extent they is deductible on Form 1040 Schedule C.
vii. Covered property damage costs, as defined in section 7A(a) of the Small
Business Act, to the extent they is deductible on Form 1040 Schedule C.
viii. Covered supplier costs, as defined in section 7A(a) of the Small Business Act, to
the extent they is deductible on Form 1040 Schedule C.
ix. Covered worker protection expenditures, as defined in section 7A(a) of the Small
Business Act, to the extent they is deductible on Form 1040 Schedule C.82
81
Under section 7(a)(36)(Q) of the Small Business Act, as amended by section 341 of the Economic Aid Act, an
EIDL loan used for purposes other than paying payroll costs and other eligible PPP expenditures is not considered a
duplication of the assistance available under the PPP.
82
Items vi. through ix. were added to conform to section 304 of the Economic Aid Act. These provisions are
effective as if included in the CARES Act and apply to any loan made before, on, or after December 27, 2020,
including forgiveness of such loan, unless SBA has remitted a loan forgiveness payment to the lender on the PPP
loan.
53
The Administrator, in consultation with the Secretary, determined that it is appropriate to
limit self-employed individuals’ (who file a Form 1040 Schedule C) use of loan proceeds
to those types of allowable uses for which the borrower made expenditures in 2019 or
2020 or that were used on covered property damage, as defined in section 7A(a). The
Administrator has determined that this limitation on self-employed individuals who file a
Form 1040 Schedule C is consistent with the borrower certification required by the Act;
specifically, that the PPP loan is necessary “to support the ongoing operations” of the
borrower. The Administrator and the Secretary thus believe that this limitation is
consistent with the structure of the Act to maintain existing operations and payroll and
not for business expansion. This limitation on the use of PPP loan proceeds will also
help to ensure that the finite appropriations available for these loans are directed toward
maintaining existing operations and payroll, as each loan that is made depletes the
appropriation.
c. Can PPP proceeds be used for lobbying activities or expenditures?83
No. None of the proceeds of a 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.
d. What happens if PPP loan funds are misused?84
83
This subsection has been added to conform to section 319 of the Economic Aid Act.
84
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.s. (April 15, 2020).
54
If you use PPP funds for unauthorized purposes, SBA will direct you to repay those
amounts. If you knowingly use the funds for unauthorized purposes, you will be subject
to additional liability such as charges for fraud. If one of your shareholders, members, or
partners uses PPP funds for unauthorized purposes, SBA will have recourse against the
shareholder, member, or partner for the unauthorized use.
12. What certifications need to be made?85
On the PPP borrower application, an authorized representative of the applicant must
certify in good faith to all of the below:86
i. The Applicant was in operation on February 15, 2020, has not permanently
closed, and was either an eligible self-employed individual, independent
contractor, or sole proprietorship with no employees, or had employees for whom
it paid salaries and payroll taxes or paid independent contractors, as reported on a
Form 1099-MISC.
ii. Current economic uncertainty makes this loan request necessary to support the
ongoing operations of the applicant.
iii. The funds will be used to retain workers and maintain payroll; or make payments
for mortgage interest, rent, utilities, covered operations expenditures, covered
property damage costs, covered supplier costs, and covered worker protection
expenditures as specified under the Paycheck Protection Program Rules; I
85
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.s. (April 15, 2020), as amended
by 85 Fed. Reg. 36308 (June 16, 2020) and has been modified to conform to the Economic Aid Act and the revised
PPP Borrower Application Form (SBA Form 2483).
86
A representative of the applicant can certify for the business as a whole if the representative is legally authorized
to do so. The certifications have been revised to conform to the Economic Aid Act and the revised PPP Borrower
Application Form (SBA Form 2483).
55
understand that if the funds are knowingly used for unauthorized purposes, the
federal government may hold me legally liable such as for charges of fraud. (As
explained above, not more than 40 percent of loan proceeds may be used for
nonpayroll costs.)
iv. I understand that loan forgiveness will be provided for the sum of documented
payroll costs, covered mortgage interest payments, covered rent payments,
covered utilities, covered operations expenditures, covered property damage
costs, covered supplier costs, and covered worker protection expenditures, and not
more than 40% of the forgiven amount may be for non-payroll costs. If required,
the Applicant will provide to the Lender and/or SBA documentation verifying the
number of full-time equivalent employees on the Applicant’s payroll as well as
the dollar amounts of eligible expenses for the covered period following this loan.
v. The Applicant has not and will not receive another loan under the Paycheck
Protection Program, section 7(a)(36) of the Small Business Act (15 U.S.C.
636(a)(36)) (this does not include Paycheck Protection Program second draw
loans, section 7(a)(37) of the Small Business Act (15 U.S.C. 636(a)(37)).
vi. The Applicant has not and will not receive a Shuttered Venue Operator grant from
SBA.
vii. The President, the Vice President, the head of an Executive department, or a
Member of Congress, or the spouse of such person as determined under
applicable common law, does not directly or indirectly hold a controlling interest
in the Applicant, with such terms having the meanings provided in section 322 of
the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.
56
viii. The Applicant is not an issuer, the securities of which are listed on an exchange
registered as a national securities exchange under section 6 of the Securities
Exchange Act of 1934 (15 U.S.C. 78f).
ix. I further certify that the information provided in this application and the
information provided in all supporting documents and forms is true and accurate
in all material respects. I understand that knowingly making a false statement to
obtain a guaranteed loan from SBA is punishable under the law, including under
18 U.S.C. 1001 and 3571 by imprisonment of not more than five years and/or a
fine of up to $250,000; under 15 U.S.C. 645 by imprisonment of not more than
two years and/or a fine of not more than $5,000; and, if submitted to a federally
insured institution, under 18 U.S.C. 1014 by imprisonment of not more than thirty
years and/or a fine of not more than $1,000,000.
x. I acknowledge that the Lender will confirm the eligible loan amount using
required documents submitted. I understand, acknowledge, and agree that the
Lender can share the tax information with SBA’s authorized representatives,
including authorized representatives of the SBA Office of Inspector General, for
the purpose of compliance with SBA Loan Program Requirements and all SBA
reviews.
13. Limited safe harbor with respect to certification concerning need for PPP loan request.87
The CARES Act requires each applicant applying for a PPP loan to certify in good faith
“that the uncertainty of current economic conditions makes necessary the loan request to
support the ongoing obligations” of the applicant. SBA, in consultation with the
87
This subsection has been added to codify the safe harbor contained in FAQ 46 (posted May 13, 2020).
57
Department of the Treasury, issued additional guidance on May 13, 2020 concerning how
SBA will review the required good-faith certification. See FAQ 46 (posted May 13,
2020). This guidance included a safe harbor providing that any PPP borrower, together
with its affiliates, that received 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 loan request in good faith.
14. Can my PPP loan be forgiven in whole or in part?88
Yes. The amount of loan forgiveness can be up to the full principal amount of the loan
and any accrued interest. An eligible borrower will not be responsible for any loan
payment if the borrower uses all of the loan proceeds for forgivable purposes and
employee and compensation levels are maintained or, if not, an applicable safe harbor or
exemption applies. The actual amount of loan forgiveness will depend, in part, on the
total amount of payroll costs (including employer contributions for group health, life,
disability, vision and dental insurance), payments of interest on mortgage obligations
incurred before February 15, 2020, rent payments on leases dated before February 15,
2020, utility payments for service that began before February 15, 2020, covered
operations expenditures, covered property damage costs, covered supplier costs, and
covered worker protection expenditures over the loan forgiveness covered period.89
Payroll costs that are qualified wages taken into account in determining the Employer
88
This subsection replaces the rule originally published at 85 Fed. Reg. 20811, subsection III.2.o (April 15, 2020),
as amended by 85 Fed. Reg. 36308 (June 16, 2020) and has been modified to conform to the Economic Aid Act.
89
Covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker
protection expenditures were added as eligible expenses in section 304 of the Economic Aid Act. Except for loans
made pursuant to section 7(a)(36) of the Small Business Act for which SBA has remitted a loan forgiveness
payment to the lender before December 27, 2020, these eligible expenses apply to any loan made before, on, or after
December 27, 2020, including forgiveness of such a loan.
58
Retention Credit are not eligible for loan forgiveness. The “loan forgiveness covered
period” is 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.
To receive full loan forgiveness, a borrower must use at least 60 percent of the PPP loan
for payroll costs, and not more than 40 percent of the loan forgiveness amount may be
attributable to nonpayroll costs. For example, if a borrower uses 59 percent of its PPP
loan for payroll costs, it will not receive the full amount of loan forgiveness it might
otherwise be eligible to receive. Instead, the borrower will receive partial loan
forgiveness, based on the requirement that 60 percent of the forgiveness amount must be
attributable to payroll costs. For example, if a borrower receives a $100,000 PPP loan,
and during the covered period the borrower spends $54,000 (or 54 percent) of its loan on
payroll costs, then because the borrower used less than 60 percent of its loan on payroll
costs, the maximum amount of loan forgiveness the borrower may receive is $90,000
(with $54,000 in payroll costs constituting 60 percent of the forgiveness amount and
$36,000 in nonpayroll costs constituting 40 percent of the forgiveness amount). Because
the Economic Aid Act changed the loan forgiveness covered period from either an 8- or
24-week period to a covered period between 8 and 24 weeks at the election of the
borrower, SBA is eliminating the “alternative covered period” as defined in the interim
final rule published at 85 Fed. Reg. 33004, 33006 (June 1, 2020), as amended.
Additionally, an eligible borrower that received a loan of $150,000 or less shall not, at the
time of its application for loan forgiveness, be required to submit any application or
59
documentation in addition to the certification and information required by
paragraph7A(l)(1)(A) of the Small Business Act. Such borrowers must retain records
relevant to the form that prove compliance with the PPP requirements —with respect to
employment records, for the 4-year period following submission of the loan forgiveness
application, and with respect to other records, for the 3-year period following submission
of the loan forgiveness application. All other borrowers must follow the existing
requirements for loan forgiveness applications and records retention. SBA may review
and audit PPP loans of $150,000 or less and access any records the borrower is required
to retain. All borrowers with loans of any size must provide documentation
independently to a lender to satisfy relevant Federal, State, local or other statutory or
regulatory requirements or in connection with an SBA loan review.
The Economic Aid Act repealed the CARES Act provision requiring SBA to deduct
EIDL Advance Amounts received by borrowers from the forgiveness payment amounts
remitted by SBA to the lender. The EIDL Advance Amount received by the borrower
will not reduce the amount of forgiveness to which the borrower is entitled and will not
be deducted from the forgiveness payment amount that SBA remits to the lender. Any
EIDL Advance Amounts previously deducted from a borrower’s forgiveness amount will
be remitted to the lender, together with interest to the remittance date.
15. Do independent contractors count as employees for purposes of PPP loan forgiveness?90
No, independent contractors have the ability to apply for a PPP loan on their own so they
do not count for purposes of a borrower’s PPP loan forgiveness.
90
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.2.p. (April 15, 2020).
60
16. For loans made prior to December 27, 2020, what additional documentation must a
borrower submit when 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 of the
preceding, directly or indirectly holds a controlling interest in the borrower?
For PPP loans 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 such person as determined under applicable common law,
directly or indirectly holds a controlling interest in the borrower, the principal executive
officer, or individual performing a similar function, of the borrower must disclose that
information to SBA. Such disclosure must be made not later than January 26, 2021, if
the borrower submitted an application for forgiveness before December 27, 2020, or not
later than 30 days after submitting an application for forgiveness.
C. What Do Lenders Need to Know and Do?
1. Who is eligible to make PPP loans?91
a. All SBA 7(a) lenders are automatically approved to make PPP loans on a
delegated basis.
b. The Act provides that the authority to make PPP loans can be extended to
additional lenders determined by the Administrator and the Secretary to have the
necessary qualifications to process, close, disburse, and service loans made with
the SBA guarantee. Since SBA is authorized to make PPP loans (and loans under
section 7(a)(37) of the Small Business Act) up to $806.45 billion by March 31,
91
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.3.a. (April 15, 2020) and has been
modified to conform to additional interim final rules or guidance and sections 323 and 343 of the Economic Aid
Act.
61
2021, the Adminstrator and the Secretary have jointly determined that authorizing
additional lenders is necessary to achieve the purpose of allowing as many
eligible borrowers as possible to receive loans by the March 31, 2021 deadline.
c. The following types of lenders have been determined to meet the criteria and are
eligible to make PPP loans unless they currently are designated in Troubled
Condition by their primary Federal regulator or are subject to a formal
enforcement action with their primary Federal regulator that addresses unsafe or
unsound lending practices:
i. Any federally insured depository institution or any federally insured
credit union;
ii. Any Farm Credit System institution92 (other than the Federal
Agricultural Mortgage Corporation) as defined in 12 U.S.C. 2002(a)
that applies the requirements under the Bank Secrecy Act and its
implementing regulations (collectively, BSA) as a federally
regulated financial institution, or functionally equivalent
requirements that are not altered by this rule;
and
iii. Any depository or non-depository financing provider that originates,
maintains, and services business loans or other commercial financial
92
Section 314 of the Economic Aid Act contains the following information related to Farm Credit System
Institutions: “(1) APPLICABLE RULES.—Solely with respect to loans under paragraphs (36) and (37) of section
7(a) of the Small Business Act (15 U.S.C. 636(a)), Farm Credit Administration regulations and guidance issued as of
July 14, 2020, and compliance with such regulations and guidance, shall be deemed functionally equivalent to
requirements referenced in section 3(a)(iii)(II) of the interim final rule of the Administration entitled ‘Business Loan
Program Temporary Changes; Paycheck Protection Program’ (85 Fed. Reg. 20811 (April 15, 2020)) or any similar
requirement referenced in that interim final rule in implementing such paragraph (37).”
62
receivables and participation interests; has a formalized compliance
program; applies the requirements under the BSA as a federally
regulated financial institution, or the BSA requirements of an
equivalent federally regulated financial institution; has been
operating since at least February 15, 2019, and has originated,
maintained, or serviced more than $50 million in business loans or
other commercial financial receivables during a consecutive 12
month period in the past 36 months, or is a service provider to any
insured depository institution that has a contract to support such
institution’s lending activities in accordance with 12 U.S.C. 1867(c)
and is in good standing with the appropriate Federal banking
agency.93
d. Qualified institutions described in 1.c.i. and ii. will be automatically qualified
under delegated authority by the SBA upon transmission of CARES Act Section
1102 Lender Agreement (SBA Form 3506) unless they currently are designated in
Troubled Condition by their primary Federal regulator or are subject to a formal
enforcement action by their primary Federal regulator that addresses unsafe or
unsound lending practices.
e. A non-bank lender may be approved to make PPP loans if it has originated,
maintained, or serviced more than $10 million in business loans or other
commercial financial receivables during a 12-month period in the past 36 months,
93
This subsection c.iii. was modified to implement the rule originally published at 85 Fed. Reg. 26324, subsection
III.2.a. (May 4, 2020).
63
if the non-bank lender is (1) a community development financial institution (other
than a federally insured bank or federally insured credit union) or (2) a majority
minority-, women-, or veteran/military-owned lender.94
2. Do lenders have to register in SAM.gov to make PPP loans?95
Yes. Given the exigent circumstances in which small businesses and lenders currently
find themselves due to the COVID-19 pandemic, PPP lenders will have thirty (30) days
from the date of the first PPP loan disbursement made by them after December 27, 2020
to complete SAM registration and provide SBA with the lender’s unique entity identifier.
3. What do lenders have to do in terms of loan underwriting?96
Each lender shall:
a. Confirm receipt of borrower certifications contained in Paycheck Protection
Program Borrower Application Form (SBA Form 2483) issued by the
Administration or lender’s equivalent form;
b. Confirm receipt of information demonstrating that a borrower was either an
eligible self-employed individual, independent contractor, or sole proprietorship
with no employees or had employees for whom the borrower paid salaries and
payroll taxes on or around February 15, 2020;
94
Lenders described in this subsection (e.) should follow the special instructions in footnote 1 of the 1102 Lender
Agreement – Non-Bank and Non-Insured Depository Institution Lenders (SBA Form 3507). This subsection (e.)
was adapted from the rule originally published at 85 Fed. Reg. 26324, subsection III.2.b. (May 4, 2020).
95
This subsection adds a new requirement that all PPP lenders must register in SAM.gov. See 2 CFR
25.110(c)(2)(iii).
96
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.3.b. (April 15, 2020) and has been
modified to conform to additional rules or guidance and the Economic Aid Act
64
c. Confirm the dollar amount of average monthly payroll costs for 2019 or 2020 by
reviewing the payroll documentation submitted with the borrower’s application;97
and
d. Follow applicable BSA requirements:
i. Federally insured depository institutions and federally insured credit
unions should continue to follow their existing BSA protocols when
making PPP loans to either new or existing customers who are
eligible borrowers under the PPP. PPP loans for existing customers
will not require re-verification under applicable BSA requirements,
unless otherwise indicated by the institution’s risk-based approach to
BSA compliance.
ii. Entities that are not presently subject to the requirements of the
BSA, should, prior to engaging in PPP lending activities, including
making PPP loans to either new or existing customers who are
eligible borrowers under the PPP, establish an anti-money laundering
(AML) compliance program equivalent to that of a comparable
federally regulated institution. Depending upon the comparable
federally regulated institution, such a program may include a
customer identification program (CIP), which includes identifying
and verifying their PPP borrowers’ identities (including e.g., date of
birth, address, and taxpayer identification number), and, if that PPP
borrower is a company, following any applicable beneficial
97
See PPP FAQ 1 (April 3, 2020) for further information on this step.
65
ownership information collection requirements. Alternatively, if
available, entities may rely on the CIP of a federally insured
depository institution or federally insured credit union with an
established CIP as part of its AML program. In either instance,
entities should also understand the nature and purpose of their PPP
customer relationships to develop customer risk profiles. Such
entities will also generally have to identify and report certain
suspicious activity to the U.S. Department of the Treasury’s
Financial Crimes Enforcement Network (FinCEN). If such entities
have questions with regard to meeting these requirements, they
should contact the FinCEN Regulatory Support Section at
FRC@fincen.gov. In addition, FinCEN has created a COVID-19-
specific contact channel, via a specific drop-down category, for
entities to communicate to FinCEN COVID-19-related concerns
while adhering to their BSA obligations. Entities that wish to
communicate such COVID-19-related concerns to FinCEN should
go to www.FinCEN.gov, click on “Need Assistance,” and select
“COVID19” in the subject drop-down list.
Each lender’s underwriting obligation under the PPP is limited to the items above and
reviewing the “Paycheck Protection Borrower Application Form.” Borrowers must
submit such documentation as is necessary to establish eligibility such as payroll records,
payroll tax filings, or Form 1099-MISC, Schedule C or F, income and expenses from a
sole proprietorship, or bank records. For borrowers that do not have any such
66
documentation, the borrower must provide other supporting documentation, such as bank
records, sufficient to demonstrate the qualifying payroll amount.
A lender may rely on any certification or documentation submitted by an applicant for a
PPP loan or an eligible recipient or eligible entity that (A) is submitted pursuant to all
applicable statutory requirements, regulations, and guidance related to a PPP loan,
including under paragraph 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36));
and (B) attests that the applicant, eligible recipient, or eligible entity, as applicable, has
accurately provided the certification or documentation to the lender in accordance with
the statutory requirements, regulations, and guidance related to PPP loans. With respect
to a lender that relies on such a certification or documentation related to a PPP loan, an
enforcement action may not be taken against the lender, and the lender shall not be
subject to any penalties relating to loan origination or forgiveness of the PPP loan, if—
(A) the lender acts in good faith relating to loan origination or forgiveness of the PPP
loan based on that reliance; and (B) all other relevant Federal, State, local, and other
statutory and regulatory requirements applicable to the lender are satisfied with respect to
the PPP loan.98
4. Can lenders rely on borrower documentation for loan forgiveness?99
98
This paragraph was added to conform to section 305 of the Economic Aid Act. This shall be effective as if
included in the CARES Act and shall apply to any loan made before, on, or after December 27, 2020, including
forgiveness of such a loan.
99
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.3.c. (April 15, 2020) and has been
modified for readability. SBA also intends to issue a consolidated interim final rule governing all aspects of loan
forgiveness and the loan review process.
67
Yes. The lender does not need to independently verify the borrower’s reported
information if the borrower submits documentation supporting its request for loan
forgiveness and attests that it accurately verified the payments for eligible costs.
5. What fees will lenders be paid?100
For PPP loans made on or after December 27, 2020, SBA will pay lenders fees, based on
the balance of the financing outstanding at the time of disbursement of the loan, for
processing PPP loans in the following amounts:
i. For loans of not more than $50,000, an amount equal to the lesser of fifty (50)
percent or $2,500;
ii. Five (5) percent for loans of more than $50,000 and not more than $350,000;
iii. Three (3) percent for loans of more than $350,000 and less than $2,000,000; and
iv. One (1) percent for loans of at least $2,000,000.
SBA will pay the fee not later than 5 days after the reported disbursement of the PPP
loan and, as required by the Economic Aid Act, may not require the fee to be repaid by
the lender unless the lender is found guilty of an act of fraud in connection with the PPP
loan.
6. Can PPP loans be sold into the secondary market?101
Yes. A PPP loan may be sold on the secondary market after the loan is fully disbursed. A
PPP loan may be sold on the secondary market at a premium or a discount to par value.
100
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.3.d. (April 15, 2020) and has been
modified to conform to section 340 of the Economic Aid Act.
101
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.4.d (April 15, 2020) and modified
to reflect that advance purchases are not available.
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7. Do the requirements for loan pledges under 13 CFR 120.434 apply to PPP loans pledged
for borrowings from a Federal Reserve Bank (FRB) or advances by a Federal Home
Loan Bank (FHLB)?102
No. Pursuant to SBA regulations at 13 CFR 120.435(d) and (e), a pledge of 7(a) loans to
a FRB or FHLB does not require SBA’s prior written consent or notice to SBA. SBA, in
consultation with Treasury, has determined that for purposes of loans made under the
PPP, the additional requirements set forth in 120.434 shall also not apply. This would
mean, for example, that SBA would not have to approve loan documents or require a
multi-party agreement among SBA, the lender, and others.
8. Are lenders required to use a promissory note provided by SBA or may they use their
own?103
Lenders may use their own promissory note or an SBA form of promissory note.
9. Are lenders required to use a separate SBA Authorization document to issue PPP
loans?104
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 (the Lender Application
Form—Paycheck Protection Program Loan Guaranty)105 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
102
This subsection was originally published at 85 Fed. Reg. 21747, subsection III.3. (April 20, 2020).
103
This subsection was originally published at 85 Fed. Reg. 23450, subsection III.1.a. (April 28, 2020).
104
This subsection was originally published at 85 Fed. Reg. 23450, subsection III.1.b. (April 28, 2020) and has
been modified to conform to the Economic Aid Act.
105
This requirement is satisfied by a lender when the lender completes the process of submitting a loan through the
E-Tran system; no transmission or retention of a physical copy of Form 2484 is required.
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disclosure, that are not inconsistent with section 1102 of the CARES Act and section 7A
of the Small Business Act, the PPP Interim Final Rules and guidance, and SBA Form
2484. See FAQ 21 (posted April 13, 2020). The decision not to require a separate SBA
Authorization in order to ensure that critical PPP loans are disbursed as efficiently as
practicable.
10. By when must a lender electronically submit an SBA Form 1502 indicating that PPP loan
funds have been disbursed?106
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 loans to
which they are entitled. Lenders must electronically upload SBA Form 1502 information
within 20 calendar days after a PPP loan is approved. The lender must report on SBA
Form 1502 whether it has fully disbursed PPP loan proceeds. A lender will not receive a
processing fee: (1) prior to full disbursement of the PPP loan; (2) if the PPP loan is
cancelled before disbursement; or (3) if the PPP loan is cancelled or voluntarily
terminated and repaid after disbursement (including if a borrower repays the PPP loan
proceeds to conform to the borrower’s certification regarding the necessity of the PPP
loan request). If the lender has received a processing fee on a loan that was cancelled or
voluntarily terminated and repaid after disbursement (including if a borrower repaid the
PPP loan proceeds to conform to the borrower’s certification regarding the necessity of
the PPP loan request), SBA will not require the lender to repay the processing fee unless
the lender is found guilty of an act of fraud in connection with the PPP loan. In addition
106
This subsection was originally published at 85 Fed. Reg. 26321, subsection III.1.b. (May 4, 2020) and has been
modified to conform to the Economic Aid Act and for readability.
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to providing ACH credit information to direct payment of the requested processing fee,
lenders will be required to confirm that all PPP loans for which the lender is requesting a
processing fee have been fully disbursed on the disbursement dates and in the loan
amounts reported. A lender must report through either E-Tran Servicing or the SBA
Form 1502 report any PPP loans that have been cancelled before disbursement or that
have been cancelled or voluntarily terminated and repaid after disbursement.
11. How do lenders report disbursements on PPP loans that are approved for loan increases
due to the Economic Aid Act?107
Lenders must submit the SBA Form 1502 information within 20 calendar days after a
PPP loan increase is approved following the SBA Form 1502 reporting process. See
subsection C.10. for more information.
D. What Do Both Borrowers and Lenders Need to Know and Do?
1. What are the loan terms and conditions?108
Loans will be guaranteed under the PPP under the same terms, conditions and processes
as other 7(a) loans, with certain changes including but not limited to:
a. The guarantee percentage is 100 percent.
b. No collateral will be required.
c. No personal guarantees will be required.
107
This subsection was added to conform to the Economic Aid Act.
108
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.4.a. (April 15, 2020) and modified
to conform to the Economic Aid Act.
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d. The interest rate will be 100 basis points or one percent, calculated on a non-
compounding, non-adjustable basis.109
e. All loans will be processed by all lenders under delegated authority and lenders
will be permitted to rely on certifications of the borrower in order to determine
eligibility of the borrower and the use of loan proceeds.
2. Do lenders have to apply the “credit elsewhere test”?110
No. When evaluating an applicant’s eligibility lenders will not be required to apply the
“credit elsewhere test” (as set forth in section 7(a)(1)(A) of the Small Business Act (15
U.S.C. 636) and SBA regulations at 13 CFR 120.101).
3. Are there any fee waivers?111
a. There will be no up-front guarantee fee payable to SBA by the borrower;
b. There will be no lender’s annual service fee (“on-going guaranty fee”) payable to
SBA;
c. There will be no subsidy recoupment fee; and
d. There will be no fee payable to SBA for any guarantee sold into the secondary
market.
4. Who pays the fee to an agent who provides assistance in connection with a PPP loan?112
Agent fees may not be paid out of the proceeds of a PPP loan. If a borrower has
knowingly retained an agent, such fees will be paid by the borrower. A lender is only
109
This subsection (d) was revised to conform to section 339 of the Economic Aid Act. The revision applies to PPP
loans made on or after December 27, 2020, but may apply with respect to a PPP loan made before that date upon the
mutual agreement of the lender and the borrower.
110
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.3.e. (April 15, 2020).
111
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.4.a. (April 15, 2020).
112
This subsection was originally published at 85 Fed. Reg. 20811, subsection III.4.c. (April 15, 2020) and modified
to conform to section 340 of the Economic Aid Act. This revision is effective as if included in the CARES Act and
applies to PPP loans made before, on, or after December 27, 2020, including forgiveness of such a loan.
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responsible for paying fees to an agent for services for which the lender directly contracts
with the agent. The total amount that an agent may collect from the lender for assistance
in preparing an application for a PPP loan (including referral to the lender) may not
exceed:
a. One (1) percent for loans of not more than $350,000;
b. 0.50 percent for loans of more than $350,000 and less than $2 million; and
c. 0.25 percent for loans of at least $2 million.
The Act authorizes the Administrator to establish limits on agent fees. The
Administrator, in consultation with the Secretary, determined that the agent fee limits set
forth above are reasonable based upon the application requirements and the fees that
lenders receive for making PPP loans.
5. Can a borrower take multiple draws from a PPP loan and thereby delay the start of the
covered period?113
No. The lender must make a one-time, full disbursement of the PPP loan within ten
calendar days of loan approval; for the purposes of this rule, a loan is considered
approved when the loan is assigned a loan number by SBA.114
Notwithstanding this limitation, lenders are not responsible for delays in disbursement
attributable to a borrower’s failure to timely provide required loan documentation,
including a signed promissory note. Loans for which funds have not been disbursed
because a borrower has not submitted required loan documentation within 20 calendar
113
This subsection was originally published at 85 Fed. Reg. 26321, subsection III.1.a. (May 4, 2020), as amended
by 85 Fed. Reg. 26321 (June 19, 2020), and has been modified for readability.
114
If the tenth calendar day is a Saturday, Sunday, or legal holiday, the period continues to run until the end of the
next business day.
73
days of loan approval shall be cancelled by the lender. When disbursing loans, lenders
must send any amount of loan proceeds designated for the refinance of an EIDL loan
directly to SBA and not to the borrower.
6. If a partnership received a PPP loan that did not include any compensation for its
partners, can the loan amount be increased to include partner compensation?115
Yes. If a partnership received a PPP loan that only included amounts necessary for
payroll costs of the partnership’s employees and other eligible operating expenses, but
did not include any amount for partner compensation,116 the lender may electronically
submit a request through SBA’s E-Tran Servicing site to increase the PPP loan amount to
include appropriate partner compensation, even if the loan has been fully disbursed and
even if the lender’s first SBA Form 1502 report to SBA on the PPP loan has already been
submitted. In no event can the increased loan amount exceed the maximum loan amount
allowed under the PPP Program, which is $10 million for an individual borrower or $20
million for a corporate group. Additionally, the borrower must provide the lender with
required documentation to support the calculation of the increase. Any request for an
increase must be submitted electronically in E-Tran on or before March 31, 2021, and is
subject to the availability of funds.
As described in subsection B.1.c., partnerships, rather than individual partners, are
eligible for a PPP loan. As described in subsection B.4.e., self-employment income of
115
This subsection was originally published at 85 Fed. Reg. 29842, subsection III.1.a. (May 19, 2020) and has been
revised to conform to sections 312 and 344 of the Economic Aid Act.
116
A partner in a partnership may not submit a separate PPP loan application as a self-employed individual. Instead,
the self-employment income of general active partners may be reported as a payroll cost, up to $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, on a PPP loan application filed by or on behalf of the partnership.
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general active partners could be reported as a payroll cost, up to $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, on a PPP loan application filed by or on
behalf of the partnership. For guidance describing how to calculate partnership PPP loan
amounts and defining the self-employment income of partners, see How to Calculate
Maximum Loan Amounts, Question 4 at https://www.sba.gov/sites/default/files/2020-
04/How-to-Calculate-Loan-Amounts.pdf (April 20, 2020).
7. If a seasonal employer received a PPP loan before December 27, 2020, can the loan
amount be increased based on a revised calculation of the maximum loan amount?117
Yes. If a seasonal employer received a PPP loan before December 27, 2020, and such
employer would be eligible for a higher maximum loan amount under section 336 of the
Economic Aid Act, as described in subsection B.4.c., the lender may electronically
submit a request through SBA’s E-Tran Servicing site to increase the PPP loan amount,
even if the loan has been fully disbursed and even if the lender’s first SBA Form 1502
report to SBA on the PPP loan has already been submitted. In no event can the increased
loan amount exceed the maximum PPP loan amount ($10 million for an individual
borrower or $20 million for a corporate group). Additionally, the borrower must provide
the lender with required documentation to support the calculation of the increase. Any
request for an increase must be submitted electronically in E-Tran on or before March 31,
2021, and is subject to the availability of funds.
117
This subsection was originally published at 85 Fed. Reg. 29842, subsection III.1.b. (May 19, 2020) and has been
revised to conform to sections 312 and 336 of the Economic Aid Act.
75
8. Which other PPP borrowers can reapply or request an increase in their PPP loan
amount?118
The following borrowers can reapply or request an increase in their PPP loan amount:
a. If a borrower returned all of a PPP loan, the borrower may reapply for a PPP loan in
an amount the borrower is eligible for under current PPP rules.
b. If a borrower returned part of a PPP loan, the borrower may reapply for an amount
equal to the difference between the amount retained and the amount previously
approved.
c. If a borrower did not accept the full amount of a PPP loan for which it was approved,
the borrower may request an increase in the amount of the PPP loan up to the amount
previously approved.
Any request for an increase must be submitted electronically in E-Tran on or before
March 31, 2021, and is subject to the availability of funds. SBA will issue additional
guidance on the process to reapply or request a loan increase under subsections D.6, D.7,
and D.8.
9. If a borrower’s PPP loan has already been fully disbursed, can the lender make an
additional disbursement for the increased loan proceeds?119
Yes. Notwithstanding the requirement set forth in paragraph 1.a. of the interim final rule
on disbursements posted on April 28, 2020, i.e., that lenders make a one-time, full
disbursement of the PPP loan within ten calendar days of loan approval, if a PPP loan is
118
This subsection was added to conform to section 312 of the Economic Aid Act. See also recalculation available
under subsection B.4.d. above for farmers and ranchers.
119
This subsection was originally published at 85 Fed. Reg. 29842, subsection III.2.a. (May 19, 2020) and revised to
conform to section 312 of the Economic Aid Act.
76
increased under subsections D.6., D.7., or D.8., the lender may make a single additional
disbursement of the increased loan proceeds.
10. Are recipients of PPP loans entitled to exemptions on the grounds provided in Federal
nondiscrimination laws for sex-specific admissions practices, sex-specific domestic
violence shelters, coreligionist housing, or Indian tribal preferences in connection with
adoption or foster care practices?120
Yes. With respect to any loan or loan forgiveness under the PPP, the nondiscrimination
provisions in the applicable SBA regulations incorporate the limitations and exemptions
provided in corresponding Federal statutory or regulatory nondiscrimination provisions
for sex-specific admissions practices at preschools, non-vocational elementary or
secondary schools, and private undergraduate higher education institutions under Title IX
of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.), for sex-specific
emergency shelters and coreligionist housing under the Fair Housing Act of 1968 (42
U.S.C. 3601 et seq.), and for adoption or foster care practices giving child placement
preferences to Indian tribes under the Indian Child Welfare Act of 1978 (25 U.S.C. 1901
et seq.).
In addition, for purposes of the PPP, SBA regulations do not bar a religious nonprofit
entity from making decisions with respect to the membership or the employment of
individuals of a particular religion to perform work connected with the carrying on by
such nonprofit of its activities.
E. Additional Information
120
This subsection was originally published at 85 Fed. Reg. 27287, section III.1. (May 8, 2020).
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All loans guaranteed by the SBA pursuant to the CARES Act and the Economic Aid Act will
be made consistent with constitutional, statutory, and regulatory protections for religious liberty,
including the First Amendment to the Constitution, the Religious Freedom Restoration Act, 42
U.S.C. 2000bb-1 and bb-3, and SBA regulation at 13 CFR 113.3-1h, which provides that nothing
in SBA nondiscrimination regulations shall apply to a religious corporation, association,
educational institution or society with respect to the membership or the employment of
individuals of a particular religion to perform work connected with the carrying on by such
corporation, association, educational institution or society of its religious activities.
SBA may provide further guidance, if needed, through SBA notices and a program guide
which will be posted on SBA’s website at www.sba.gov.
Questions on the Paycheck Protection Program 7(a) Loans may be directed to the Lender
Relations Specialist in the local SBA Field Office. The local SBA Field Office may be found at
https://www.sba.gov/tools/local-assistance/districtoffices.
Compliance with Executive Orders 12866, 12988, 13132, 13563, and 13771, the Paperwork
Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-612).
Executive Orders 12866, 13563, and 13771
This interim final rule is economically significant for the purposes of Executive Orders
12866 and 13563, and the Office of Management and Budget’s Office of Information and
Regulatory Affairs (OIRA) has determined that this is a major rule under the Congressional
Review Act (5 U.S.C. 804(2)). SBA, however, is proceeding under the emergency provision at
Executive Order 12866 section 6(a)(3)(D) based on the need to move expeditiously to mitigate
the current economic conditions arising from the COVID–19 emergency. This rule’s designation
under Executive Order 13771 will be informed by public comment.
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This rule is necessary to implement the Economic Aid Act in order to provide economic
relief to small businesses nationwide adversely impacted under the COVID-19 Emergency
Declaration. We anticipate that this rule will result in substantial benefits to small businesses,
their employees, and the communities they serve. However, we lack data to estimate the effects
of this rule.
The Administrator of OIRA has determined that this is a major rule for purposes of the
Congressional Review Act (5 U.S.C. 801 et seq.) (CRA). Under section 801(3) of the CRA, a
major rule takes effect 60 days after the rule is published in the Federal Register.
Notwithstanding this requirement, section 808(2) of the CRA allows agencies to dispense
with the requirements of section 801 when the agency for good cause finds that such procedure
would be impracticable, unnecessary, or contrary to the public interest and the rule shall take
effect at such time as the agency promulgating the rule determines. Pursuant to section 808(2) of
the CRA, SBA finds, for good cause, that a 60-day delay in the effective date is unnecessary and
contrary to the public interest.
As discussed elsewhere in this interim final rule, the last day to apply for and receive a PPP loan
is March 31, 2021. Given the short duration of this program, and the urgent need to issue loans
quickly, the Administrator in consultation with the Secretary has determined that it is impractical
and not in the public interest to provide a delayed effective date. An immediate effective date
will give small businesses the maximum amount of time to apply for loans and lenders the
maximum amount of time to process applications before the program ends.
Executive Order 12988
SBA has drafted this rule, to the extent practicable, in accordance with the standards set forth
in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize litigation, eliminate
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ambiguity, and reduce burden. The rule has no preemptive effect but does have some retroactive
effect consistent with specific applicability provisions of the Economic Aid Act (such provisions
are identified in the footnotes).
Executive Order 13132
SBA has determined that this rule will not have substantial direct effects on the States, on the
relationship between the National Government and the States, or on the distribution of power and
responsibilities among the various layers of government. Therefore, SBA has determined that
this rule has no federalism implications warranting preparation of a federalism assessment.
Paperwork Reduction Act, 44 U.S.C. Chapter 35
SBA has determined that this rule requires revisions to existing recordkeeping or reporting
requirements of the Paycheck Protection Program (PPP) information collection (OMB Control
Number 3245-0407) as a result of amendments made to the PPP by the Economic Aid Act and
implemented in this interim final rule. The revisions will affect the PPP Borrower Application
Form (SBA Form 2483), the PPP Lender Application Form (SBA Form 2484), the Lender
Application Form for Federally Insured Depository Institutions, Federally Insured Credit Unions,
and Farm Credit System Institutions (SBA Form 3506), and the Lender Application Form for
Non-Bank and Non-Insured Depository Institution Lenders (SBA Form 3507).
SBA Form 2483 has been revised to add housing cooperatives, section 501(c)(6)
organizations, destination marketing organizations, and certain news organizations to the
categories of eligible entities; to collect the NAICS code of the applicant; to add additional
eligible use of proceeds; and to add or revise the certifications to incorporate the Economic Aid
Act amendments. Changes were made to SBA Form 2484 to conform to the changes made to
SBA Form 2483. SBA Forms 3506 and 3507 were revised to extend the term through March 31,
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2021; restate the way interest rate is calculated; and make clarifying changes for consistency
with program requirements.
SBA is developing a process to collect the information necessary for eligible borrowers to
reapply or request an increase in their PPP loan amount as described in this interim final rule.
SBA has requested emergency approval of the revisions to this PPP information collection to
enable the Agency to resume the reauthorized PPP as quickly as possible. Without such
emergency approval, the authority for the program would expire before the procedural steps,
including the comment periods generally required by the Paperwork Reduction Act, could be
completed.
Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a
proposed rule, or a final rule pursuant to section 553(b) of the APA or another law, the agency
must prepare a regulatory flexibility analysis that meets the requirements of the RFA and publish
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, the RFA normally requires
agencies to describe the impact of a rulemaking on small entities by providing a regulatory
impact analysis. Such analysis must address the consideration of regulatory options that would
lessen the economic effect of the rule on small entities. The RFA defines a ‘‘small entity’’ as (1)
a proprietary firm meeting the size standards of the Small Business Administration (SBA); (2) a
nonprofit organization that is not dominant in its field; or (3) a small government jurisdiction
with a population of less than 50,000. 5 U.S.C. 601(3)–(6). Except for small government
jurisdictions with a population of less than 50,000, neither State nor local governments are
‘‘small entities.’’
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The requirement to conduct a regulatory impact analysis does not apply if the head of the
agency “certifies that the rule will not, if promulgated, have a significant economic impact on a
substantial number of small entities.” 5 U.S.C. 605(b). The agency must, however, publish the
certification in the Federal Register at the time of publication of the rule, “along with a statement
providing the factual basis for such certification.” If the agency head has not waived the
requirements for a regulatory flexibility analysis in accordance with the RFA’s waiver provision,
and no other RFA exception applies, the agency must prepare the regulatory flexibility analysis
and publish it in the Federal Register at the time of promulgation or, if the rule is promulgated in
response to an emergency that makes timely compliance impracticable, within 180 days of
publication of the final rule. 5 U.S.C. 604(a), 608(b).
Rules that are exempt from notice and comment are also exempt from the RFA requirements,
including conducting a regulatory flexibility analysis, when among other things the agency for
good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to
the public interest. Small Business Administration’s Office of Advocacy guide: How to Comply
with the Regulatory Flexibility Ac. Ch.1. p.9. Since this rule is exempt from notice and
comment, SBA is not required to conduct a regulatory flexibility analysis.
Authority: 15 U.S.C. 636(a)(36); Coronavirus Aid, Relief, and Economic Security Act, Pub. L.
116-136, section 1114 and Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues
Act (Pub. L. 116-260), section 303.
Jovita Carranza,
Administrator
Michael Faulkender,
Assistant Secretary for Economic Policy
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