Paycheck Protection Program Loans Frequently Asked Questions (FAQs), As of October 7, 2020
Summary
Frequently asked questions on Paycheck Protection Program (PPP) loans from the Small Business Administration (SBA), in consultation with the Department of the Treasury, as of October 7, 2020. They open with how lenders confirm average monthly payroll costs under the PPP Interim Final Rule and cover eligibility, affiliation, documentation and lender duties, including whether PPP loans to existing customers are new accounts under the FinCEN customer due diligence rule. Question 52, published October 7, 2020, addresses whether promissory notes must be modified to reflect the longer payment deferral period under the Paycheck Protection Program Flexibility Act of 2020.
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As of October 7, 2020
PAYCHECK PROTECTION PROGRAM LOANS
Frequently Asked Questions (FAQs)
The Small Business Administration (SBA), in consultation with the Department of the Treasury,
intends to provide timely additional guidance to address borrower and lender questions
concerning the implementation of the Paycheck Protection Program (PPP), established by section
1102 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). This
document will be updated on a regular basis.
Borrowers and lenders may rely on the guidance provided in this document as SBA’s
interpretation of the CARES Act and of the Paycheck Protection Program Interim Final Rules
(“PPP Interim Final Rules”) (link). The U.S. government will not challenge lender PPP actions
that conform to this guidance, 1 and to the PPP Interim Final Rules and any subsequent
rulemaking in effect at the time.
1. Question: Paragraph 3.b.iii of the PPP Interim Final Rule states that lenders must
“[c]onfirm the dollar amount of average monthly payroll costs for the preceding calendar
year by reviewing the payroll documentation submitted with the borrower’s application.”
Does that require the lender to replicate every borrower’s calculations?
Answer: No. Providing an accurate calculation of payroll costs is the responsibility of
the borrower, and the borrower attests to the accuracy of those calculations on the
Borrower Application Form. Lenders are expected to perform a good faith review, in a
reasonable time, of the borrower’s calculations and supporting documents concerning
average monthly payroll cost. For example, minimal review of calculations based on a
payroll report by a recognized third-party payroll processor would be reasonable. In
addition, as the PPP Interim Final Rule indicates, lenders may rely on borrower
representations, including with respect to amounts required to be excluded from payroll
costs.
If the lender identifies errors in the borrower’s calculation or material lack of
substantiation in the borrower’s supporting documents, the lender should work with the
borrower to remedy the issue. 2
2. Question: Are small business concerns (as defined in section 3 of the Small Business
Act, 15 U.S.C. 632) required to have 500 or fewer employees to be eligible borrowers in
the PPP?
Answer: No. Small business concerns can be eligible borrowers even if they have more
than 500 employees, as long as they satisfy the existing statutory and regulatory
definition of a “small business concern” under section 3 of the Small Business Act, 15
U.S.C. 632. A business can qualify if it meets the SBA employee-based or revenue-
1
This document does not carry the force and effect of law independent of the statute and regulations on which it is
based.
2
Question 1 published April 3, 2020.
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As of October 7, 2020
based size standard corresponding to its primary industry. Go to www.sba.gov/size for
the industry size standards.
Additionally, a business can qualify for the Paycheck Protection Program as a small
business concern if it met both tests in SBA’s “alternative size standard” as of March 27,
2020: (1) maximum tangible net worth of the business is not more than $15 million; and
(2) the average net income after Federal income taxes (excluding any carry-over losses)
of the business for the two full fiscal years before the date of the application is not more
than $5 million.
A business that qualifies as a small business concern under section 3 of the Small
Business Act, 15 U.S.C. 632, may truthfully attest to its eligibility for PPP loans on the
Borrower Application Form, unless otherwise ineligible.
3. Question: Does my business have to qualify as a small business concern (as defined in
section 3 of the Small Business Act, 15 U.S.C. 632) in order to participate in the PPP?
Answer: No. In addition to small business concerns, a business is eligible for a PPP
loan if the business has 500 or fewer employees whose principal place of residence is in
the United States, or the business meets the SBA employee-based size standards for the
industry in which it operates (if applicable). Similarly, PPP loans are also available for
qualifying tax-exempt nonprofit organizations described in section 501(c)(3) of the
Internal Revenue Code (IRC), tax-exempt veterans organization described in section
501(c)(19) of the IRC, and Tribal business concerns described in section 31(b)(2)(C) of
the Small Business Act that have 500 or fewer employees whose principal place of
residence is in the United States, or meet the SBA employee-based size standards for the
industry in which they operate.
4. Question: Are lenders required to make an independent determination regarding
applicability of affiliation rules under 13 C.F.R. 121.301(f) to borrowers?
Answer: No. It is the responsibility of the borrower to determine which entities (if any)
are its affiliates and determine the employee headcount of the borrower and its affiliates.
Lenders are permitted to rely on borrowers’ certifications.
5. Question: Are borrowers required to apply SBA’s affiliation rules under 13 C.F.R.
121.301(f)?
Answer: Yes. Borrowers must apply the affiliation rules set forth in SBA’s Interim
Final Rule on Affiliation. A borrower must certify on the Borrower Application Form
that the borrower is eligible to receive a PPP loan, and that certification means that the
borrower is a small business concern as defined in section 3 of the Small Business Act
(15 U.S.C. 632), meets the applicable SBA employee-based or revenue-based size
standard, or meets the tests in SBA’s alternative size standard, after applying the
affiliation rules, if applicable. SBA’s existing affiliation exclusions apply to the PPP,
including, for example the exclusions under 13 CFR 121.103(b)(2).
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6. Question: The affiliation rule based on ownership (13 C.F.R. 121.301(f)(1)) states that
SBA will deem a minority shareholder in a business to control the business if the
shareholder has the right to prevent a quorum or otherwise block action by the board of
directors or shareholders. If a minority shareholder irrevocably gives up those rights, is it
still considered to be an affiliate of the business?
Answer: No. If a minority shareholder in a business irrevocably waives or relinquishes
any existing rights specified in 13 C.F.R. 121.301(f)(1), the minority shareholder would
no longer be an affiliate of the business (assuming no other relationship that triggers the
affiliation rules).
7. Question: The CARES Act excludes from the definition of payroll costs any employee
compensation in excess of an annual salary of $100,000. Does that exclusion apply to all
employee benefits of monetary value?
Answer: No. The exclusion of compensation in excess of $100,000 annually applies
only to cash compensation, not to non-cash benefits, including:
• employer contributions to defined-benefit or defined-contribution retirement
plans;
• payment for the provision of employee benefits consisting of group health care
coverage, including insurance premiums; and
• payment of state and local taxes assessed on compensation of employees.
8. Question: Do PPP loans cover paid sick leave?
Answer: Yes. PPP loans covers payroll costs, including costs for employee vacation,
parental, family, medical, and sick leave. However, the CARES Act excludes qualified
sick and family leave wages for which a credit is allowed under sections 7001 and 7003
of the Families First Coronavirus Response Act (Public Law 116–127). Learn more
about the Paid Sick Leave Refundable Credit here.
9. Question: My small business is a seasonal business whose activity increases from April
to June. Considering activity from that period would be a more accurate reflection of my
business’s operations. However, my small business was not fully ramped up on February
15, 2020. Am I still eligible?
Answer: In evaluating a borrower’s eligibility, a lender may consider whether a seasonal
borrower was in operation on February 15, 2020 or for an 8-week period between
February 15, 2019 and June 30, 2019.
10. Question: What if an eligible borrower contracts with a third-party payer such as a
payroll provider or a Professional Employer Organization (PEO) to process payroll and
report payroll taxes?
Answer: SBA recognizes that eligible borrowers that use PEOs or similar payroll
providers are required under some state registration laws to report wage and other data on
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As of October 7, 2020
the Employer Identification Number (EIN) of the PEO or other payroll provider. In these
cases, payroll documentation provided by the payroll provider that indicates the amount
of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s
employees will be considered acceptable PPP loan payroll documentation. Relevant
information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941
Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly
Federal Tax Return, should be used if it is available; otherwise, the eligible borrower
should obtain a statement from the payroll provider documenting the amount of wages
and payroll taxes. In addition, employees of the eligible borrower will not be considered
employees of the eligible borrower’s payroll provider or PEO.
11. Question: May lenders accept signatures from a single individual who is authorized to
sign on behalf of the borrower?
Answer: Yes. However, the borrower should bear in mind that, as the Borrower
Application Form indicates, only an authorized representative of the business seeking a
loan may sign on behalf of the business. An individual’s signature as an “Authorized
Representative of Applicant” is a representation to the lender and to the U.S. government
that the signer is authorized to make the certifications, including with respect to the
applicant and each owner of 20% or more of the applicant’s equity, contained in the
Borrower Application Form. Lenders may rely on that representation and accept a single
individual’s signature on that basis.
12. Question: I need to request a loan to support my small business operations in light of
current economic uncertainty. However, I pleaded guilty to a felony crime a very long
time ago. Am I still eligible for the PPP?
Answer: Eligibility for the PPP has been expanded. A business is ineligible due to an
owner’s criminal history only if an owner of 20 percent or more of the equity of the
applicant:
• is presently incarcerated or, for any felony, is presently subject to an indictment,
criminal information, arraignment, or other means by which formal criminal
charges are brought in any jurisdiction; or
• has been convicted of, pleaded guilty or nolo contendere to, or commenced any
form of parole or probation (including probation before judgment) for, a felony
involving fraud, bribery, embezzlement, or a false statement in a loan application
or an application for federal financial assistance within the last five years or any
other felony within the last year.
13. Question: Are lenders permitted to use their own online portals and an electronic form
that they create to collect the same information and certifications as in the Borrower
Application Form, in order to complete implementation of their online portals?
Answer: Yes. Lenders may use their own online systems and a form they establish that
asks for the same information (using the same language) as the Borrower Application
Form. Lenders are still required to send the data to SBA using SBA’s interface.
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As of October 7, 2020
14. Question: What time period should borrowers use to determine their number of
employees and payroll costs to calculate their maximum loan amounts?
Answer: In general, borrowers can calculate their aggregate payroll costs using data
either from the previous 12 months or from calendar year 2019. For seasonal businesses,
the applicant may use average monthly payroll for the period between February 15, 2019,
or March 1, 2019, and June 30, 2019. An applicant that was not in business from
February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the
period January 1, 2020 through February 29, 2020.
Borrowers may use their average employment over the same time periods to determine
their number of employees, for the purposes of applying an employee-based size
standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average
number of employees per pay period in the 12 completed calendar months prior to the
date of the loan application (or the average number of employees for each of the pay
periods that the business has been operational, if it has not been operational for 12
months).
15. Question: Should payments that an eligible borrower made to an independent contractor
or sole proprietor be included in calculations of the eligible borrower’s payroll costs?
Answer: No. Any amounts that an eligible borrower has paid to an independent
contractor or sole proprietor should be excluded from the eligible business’s payroll
costs. However, an independent contractor or sole proprietor will itself be eligible for a
loan under the PPP, if it satisfies the applicable requirements.
16. Question: How should a borrower account for federal taxes when determining its
payroll costs for purposes of the maximum loan amount, allowable uses of a PPP loan,
and the amount of a loan that may be forgiven?
Answer: Under the Act, payroll costs are calculated on a gross basis without regard to
(i.e., not including subtractions or additions based on) federal taxes imposed or withheld,
such as the employee’s and employer’s share of Federal Insurance Contributions Act
(FICA) and income taxes required to be withheld from employees. As a result, payroll
costs are not reduced by taxes imposed on an employee and required to be withheld by
the employer, but payroll costs do not include the employer’s share of payroll tax. For
example, an employee who earned $4,000 per month in gross wages, from which $500 in
federal taxes was withheld, would count as $4,000 in payroll costs. The employee would
receive $3,500, and $500 would be paid to the federal government. However, the
employer-side federal payroll taxes imposed on the $4,000 in wages are excluded from
payroll costs under the statute. 3
3
The definition of “payroll costs” in the CARES Act, 15 U.S.C. 636(a)(36)(A)(viii), excludes “taxes imposed or
withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period,” defined as
February 15, 2020, to June 30, 2020. As described above, the SBA interprets this statutory exclusion to mean that
payroll costs are calculated on a gross basis, without subtracting federal taxes that are imposed on the employee or
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17. Question: I filed or approved a loan application based on the version of the PPP Interim
Final Rule published on April 2, 2020. Do I need to take any action based on the updated
guidance in these FAQs?
Answer: No. Borrowers and lenders may rely on the laws, rules, and guidance available
at the time of the relevant application. However, borrowers whose previously submitted
loan applications have not yet been processed may revise their applications based on
clarifications reflected in these FAQs.
18. Question: Are PPP loans for existing customers considered new accounts for FinCEN
Rule CDD purposes? Are lenders required to collect, certify, or verify beneficial
ownership information in accordance with the rule requirements for existing customers?
Answer: If the PPP loan is being made to an existing customer and the necessary
information was previously verified, you do not need to re-verify the information.
Furthermore, if federally insured depository institutions and federally insured credit
unions eligible to participate in the PPP program have not yet collected beneficial
ownership information on existing customers, such institutions do not need to collect and
verify beneficial ownership information for those customers applying for new PPP loans,
unless otherwise indicated by the lender’s risk-based approach to BSA compliance. 4
19. Question: Do lenders have to use a promissory note provided by SBA or may they use
their own?
Answer: Lenders may use their own promissory note or an SBA form of promissory
note.
withheld from employee wages. Unlike employer-side payroll taxes, such employee-side taxes are ordinarily
expressed as a reduction in employee take-home pay; their exclusion from the definition of payroll costs means
payroll costs should not be reduced based on taxes imposed on the employee or withheld from employee wages.
This interpretation is consistent with the text of the statute and advances the legislative purpose of ensuring workers
remain paid and employed. Further, because the reference period for determining a borrower’s maximum loan
amount will largely or entirely precede the period from February 15, 2020, to June 30, 2020, and the period during
which borrowers will be subject to the restrictions on allowable uses of the loans may extend beyond that period, for
purposes of the determination of allowable uses of loans and the amount of loan forgiveness, this statutory exclusion
will apply with respect to such taxes imposed or withheld at any time, not only during such period.
4
Questions 2 – 18 published April 6, 2020. Question 12 revised June 25, 2020. The original FAQ 12 was as
follows:
Question: I need to request a loan to support my small business operations in light of current
economic uncertainty. However, I pleaded guilty to a felony crime a very long time ago. Am I still
eligible for the PPP?
Answer: Yes. Businesses are only ineligible if an owner of 20 percent or more of the equity of the
applicant is presently incarcerated, on probation, on parole; subject to an indictment, criminal
information, arraignment, or other means by which formal criminal charges are brought in any
jurisdiction; or, within the last five years, for any felony, has been convicted; pleaded guilty; pleaded
nolo contendere; been placed on pretrial diversion; or been placed on any form of parole or probation
(including probation before judgment).
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As of October 7, 2020
20. Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll
costs over an eight-week or 24-week period; when does that eight-week or 24-week
period begin?
Answer: The eight-week or 24-week period starts on the date your lender makes a
disbursement of the PPP loan to the borrower. The lender must disburse the loan no later
than 10 calendar days from the date of loan approval.
The Paycheck Protection Program Flexibility Act of 2020, which became law on June 5,
2020, extended the covered period for loan forgiveness from eight weeks after the date of
loan disbursement to 24 weeks after the date of loan disbursement, providing
substantially greater flexibility for borrowers to qualify for loan forgiveness. The 24-
week period applies to all borrowers, but borrowers that received an SBA loan number
before June 5, 2020, have the option to use an eight-week period. 5
21. Question: Do lenders need a separate SBA Authorization document to issue PPP loans?
Answer: No. A lender does not need a separate SBA Authorization for SBA to
guarantee a PPP loan. However, lenders must have executed SBA Form 2484 (the
Lender Application Form for the Paycheck Protection Program) 6 to issue PPP loans and
receive a loan number for each originated PPP loan. Lenders may include in their
promissory notes for PPP loans any terms and conditions, including relating to
amortization and disclosure, that are not inconsistent with Sections 1102 and 1106 of the
CARES Act, the PPP Interim Final Rules and guidance, and SBA Form 2484.
22. Question: I am a non-bank lender that meets all applicable criteria of the PPP Interim
Final Rule. Will I be automatically enrolled as a PPP lender? What criteria will SBA
and the Treasury Department use to assess whether to approve my application to
participate as a PPP lender?
Answer: We encourage lenders that are not currently 7(a) lenders to apply in order to
increase the scope of PPP lending options and the speed with which PPP loans can be
disbursed to help small businesses across America. We recognize that financial
technology solutions can promote efficiency and financial inclusion in implementing the
PPP. Applicants should submit SBA Form 3507 and the relevant attachments to
NFRLApplicationForPPP@sba.gov. Submission of the SBA Form 3507 does not result
in automatic enrollment in the PPP. SBA and the Treasury Department will evaluate
each application from a non-bank or non-insured depository institution lender and
5
Questions 19 – 20 published April 8, 2020. Question 20 revised June 25, 2020. The original FAQ 20 was as
follows:
Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over
an eight-week period; when does that eight-week period begin?
Answer: The eight-week period begins on the date the lender makes the first disbursement of the
PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten
calendar days from the date of loan approval.
6
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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As of October 7, 2020
determine whether the applicant has the necessary qualifications to process, close,
disburse, and service PPP loans made with SBA’s guarantee. SBA may request
additional information from the applicant before making a determination.
23. Question: How do the $10 million cap and affiliation rules work for franchises?
Answer: If a franchise brand is listed on the SBA Franchise Directory, each of its
franchisees that meets the applicable size standard can apply for a PPP loan. (The
franchisor does not apply on behalf of its franchisees.) The $10 million cap on PPP loans
is a limit per franchisee entity, and each franchisee is limited to one PPP loan.
Franchise brands that have been denied listing on the Directory because of affiliation
between franchisor and franchisee may request listing to receive PPP loans. SBA will
not apply affiliation rules to a franchise brand requesting listing on the Directory to
participate in the PPP, but SBA will confirm that the brand is otherwise eligible for
listing on the Directory.
24. Question: How do the $10 million cap and affiliation rules work for hotels and
restaurants (and any business assigned a North American Industry Classification System
(NAICS) code beginning with 72)?
Answer: Under the CARES Act, any single business entity that is assigned a NAICS
code beginning with 72 (including hotels and restaurants) and that employs not more than
500 employees per physical location is eligible to receive a PPP loan.
In addition, SBA’s affiliation rules (13 CFR 121.103 and 13 CFR 121.301) do not apply
to any business entity that is assigned a NAICS code beginning with 72 and that employs
not more than a total of 500 employees. As a result, if each hotel or restaurant location
owned by a parent business is a separate legal business entity, each hotel or restaurant
location that employs not more than 500 employees is permitted to apply for a separate
PPP loan provided it uses its unique EIN.
The $10 million maximum loan amount limitation applies to each eligible business entity,
because individual business entities cannot apply for more than one loan. The following
examples illustrate how these principles apply.
Example 1. Company X directly owns multiple restaurants and has no affiliates.
• Company X may apply for a PPP loan if it employs 500 or fewer employees per
location (including at its headquarters), even if the total number of employees
employed across all locations is over 500.
Example 2. Company X wholly owns Company Y and Company Z (as a result,
Companies X, Y, and Z are all affiliates of one another). Company Y and Company Z
each own a single restaurant with 500 or fewer employees.
• Company Y and Company Z can each apply for a separate PPP loan, because
each has 500 or fewer employees. The affiliation rules do not apply, because
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Company Y and Company Z each has 500 or fewer employees and is in the food
services business (with a NAICS code beginning with 72).
Example 3. Company X wholly owns Company Y and Company Z (as a result,
Companies X, Y, and Z are all affiliates of one another). Company Y owns a restaurant
with 400 employees. Company Z is a construction company with 400 employees.
• Company Y is eligible for a PPP loan because it has 500 or fewer employees.
The affiliation rules do not apply to Company Y, because it has 500 or fewer
employees and is in the food services business (with a NAICS code beginning
with 72).
• The waiver of the affiliation rules does not apply to Company Z, because
Company Z is in the construction industry. Under SBA’s affiliation rules, 13
CFR 121.301(f)(1) and (3), Company Y and Company Z are affiliates of one
another because they are under the common control of Company X, which wholly
owns both companies. This means that the size of Company Z is determined by
adding its employees to those of Companies X and Y. Therefore, Company Z is
deemed to have more than 500 employees, together with its affiliates. However,
Company Z may be eligible to receive a PPP loan as a small business concern if
it, together with Companies X and Y, meets SBA’s other applicable size
standards,” as explained in FAQ #2.
25. Question: Does the information lenders are required to collect from PPP applicants
regarding every owner who has a 20% or greater ownership stake in the applicant
business (i.e., owner name, title, ownership %, TIN, and address) satisfy a lender’s
obligation to collect beneficial ownership information (which has a 25% ownership
threshold) under the Bank Secrecy Act?
Answer:
For lenders with existing customers: With respect to collecting beneficial ownership
information for owners holding a 20% or greater ownership interest, if the PPP loan is
being made to an existing customer and the lender previously verified the necessary
information, the lender does not need to re-verify the information. Furthermore, if
federally insured depository institutions and federally insured credit unions eligible to
participate in the PPP program have not yet collected such beneficial ownership
information on existing customers, such institutions do not need to collect and verify
beneficial ownership information for those customers applying for new PPP loans, unless
otherwise indicated by the lender’s risk-based approach to Bank Secrecy Act (BSA)
compliance.
For lenders with new customers: For new customers, the lender’s collection of the
following information from all natural persons with a 20% or greater ownership stake in
the applicant business will be deemed to satisfy applicable BSA requirements and
FinCEN regulations governing the collection of beneficial ownership information: owner
name, title, ownership %, TIN, address, and date of birth. If any ownership interest of
20% or greater in the applicant business belongs to a business or other legal entity,
lenders will need to collect appropriate beneficial ownership information for that entity.
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As of October 7, 2020
If you have questions about requirements related to beneficial ownership, go to
https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule. Decisions
regarding further verification of beneficial ownership information collected from new
customers should be made pursuant to the lender’s risk-based approach to BSA
compliance. 7
26. Question: SBA regulations require approval by SBA’s Standards of Conduct Committee
(SCC) for SBA Assistance, other than disaster assistance, to an entity, if its sole
proprietor, partner, officer, director, or stockholder with a 10 percent or more interest is:
a current SBA employee; a Member of Congress; an appointed official or employee of
the legislative or judicial branch; a member or employee of an SBA Advisory Council or
SCORE volunteer; or a household member of any of the preceding individuals. Do these
entities need the approval of the SCC in order to be eligible for a PPP loan?
Answer: The SCC has authorized a blanket approval for PPP loans to such entities so
that further action by the SCC is not necessary in the PPP program.
27. Question: SBA regulations require a written statement of no objection by the pertinent
Department or military service before it provides any SBA Assistance, other than disaster
loans, to an entity, if its sole proprietor, partner, officer, director, or stockholder with a 10
percent or more interest, or if a household member of any of the preceding individuals, is
an employee of another Government Department or Agency having a grade of at least
GS-13 or its equivalent. Does this requirement apply to PPP loans?
Answer: No. The SCC has determined that a written statement of no objection is not
required from another Government Department or Agency for PPP loans.
28. Question: Is a lender permitted to submit a PPP loan application to SBA through E-Tran
before the lender has fulfilled its responsibility to review the required borrower
documentation and calculation of payroll costs?
Answer: No. Before a lender submits a PPP loan through E-Tran, the lender must have
collected the information and certifications contained in the Borrower Application Form
and the lender must have fulfilled its obligations set forth in paragraphs 3.b.(i)-(iii) of the
PPP Interim Final Rule. Please refer to the Interim Final Rule and FAQ #1 for more
information on the lender’s responsibility regarding confirmation of payroll costs.
Lenders who did not understand that these steps are required before submission to E-Tran
need not withdraw applications submitted to E-Tran before April 14, 2020, but must
fulfill lender responsibilities with respect to those applications as soon as practicable and
no later than loan closing. 8
7
Questions 21 – 25 published April 13, 2020.
8
Questions 26 – 28 published April 14, 2020.
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As of October 7, 2020
29. Question: Can lenders use scanned copies of documents or E-signatures or E-consents
permitted by the E-sign Act?
Answer: Yes. All PPP lenders may accept scanned copies of signed loan applications
and documents containing the information and certifications required by SBA Form 2483
and the promissory note used for the PPP loan. Additionally, lenders may also accept
any form of E-consent or E-signature that complies with the requirements of the
Electronic Signatures in Global and National Commerce Act (P.L. 106-229).
If electronic signatures are not feasible, when obtaining a wet ink signature without in-
person contact, lenders should take appropriate steps to ensure the proper party has
executed the document.
This guidance does not supersede signature requirements imposed by other applicable
law, including by the lender’s primary federal regulator. 9
30. Question: Can a lender sell a PPP loan into the secondary market?
Answer: Yes. A PPP loan may be sold into the secondary market at any time after the
loan is fully disbursed. A secondary market sale of a PPP loan does not require SBA
approval. A PPP loan sold into the secondary market is 100% SBA guaranteed. A PPP
loan may be sold on the secondary market at a premium or a discount to par value. 10
31. Question: Do businesses owned by large companies with adequate sources of liquidity
to support the business’s ongoing operations qualify for a PPP loan?
Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all
borrowers must assess their economic need for a PPP loan under the standard established
by the CARES Act and the PPP regulations at the time of the loan application. Although
the CARES Act suspends the ordinary requirement that borrowers must be unable to
obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers
still must certify in good faith that their PPP loan request is necessary. Specifically,
before submitting a PPP application, all borrowers should review carefully the required
certification that “[c]urrent economic uncertainty makes this loan request necessary to
support the ongoing operations of the Applicant.” Borrowers must make this certification
in good faith, taking into account their current business activity and their ability to access
other sources of liquidity sufficient to support their ongoing operations in a manner that is
not significantly detrimental to the business. For example, it is unlikely that a public
company with substantial market value and access to capital markets will be able to make
the required certification in good faith, and such a company should be prepared to
demonstrate to SBA, upon request, the basis for its certification.
9
Question 29 published April 15, 2020.
10
Question 30 published April 17, 2020.
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As of October 7, 2020
Lenders may rely on a borrower’s certification regarding the necessity of the loan
request. Any borrower that applied for a PPP loan prior to the issuance of this guidance
and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the
required certification in good faith. 11
32. Question: Does the cost of a housing stipend or allowance provided to an employee as
part of compensation count toward payroll costs?
Answer: Yes. Payroll costs includes all cash compensation paid to employees, subject to
the $100,000 annual compensation per employee limitation.
33. Question: Is there existing guidance to help PPP applicants and lenders determine
whether an individual employee’s principal place of residence is in the United States?
Answer: PPP applicants and lenders may consider IRS regulations (26 CFR § 1.121-
1(b)(2)) when determining whether an individual employee’s principal place of residence
is in the United States.
34. Question: Are agricultural producers, farmers, and ranchers eligible for PPP loans?
Answer: Yes. Agricultural producers, farmers, and ranchers are eligible for PPP loans
if: (i) the business has 500 or fewer employees, or (ii) the business fits within the
revenue-based sized standard, which is average annual receipts of $1 million.
Additionally, agricultural producers, farmers, and ranchers can qualify for PPP loans as a
small business concern if their business meets SBA’s “alternative size standard.” The
“alternative size standard” is currently: (1) maximum net worth of the business is not
more than $15 million, and (2) the average net income after Federal income taxes
(excluding any carry-over losses) of the business for the two full fiscal years before the
date of the application is not more than $5 million.
For all of these criteria, the applicant must include its affiliates in its calculations. Link to
Applicable Affiliation Rules for the PPP.
35. Question: Are agricultural and other forms of cooperatives eligible to receive PPP
loans?
Answer: As long as other PPP eligibility requirements are met, small agricultural
cooperatives and other cooperatives may receive PPP loans. 12
36. Question: To determine borrower eligibility under the 500-employee or other applicable
threshold established by the CARES Act, must a borrower count all employees or only
full-time equivalent employees?
11
Question 31 published April 23, 2020.
12
Questions 32 – 35 published April 24, 2020.
12
As of October 7, 2020
Answer: For purposes of loan eligibility, the CARES Act defines the term employee to
include “individuals employed on a full-time, part-time, or other basis.” A borrower
must therefore calculate the total number of employees, including part-time employees,
when determining their employee headcount for purposes of the eligibility threshold. For
example, if a borrower has 200 full-time employees and 50 part-time employees each
working 10 hours per week, the borrower has a total of 250 employees.
By contrast, for purposes of loan forgiveness, the CARES Act uses the standard of “full-
time equivalent employees” to determine the extent to which the loan forgiveness amount
will be reduced in the event of workforce reductions. 13
37. Question: Do businesses owned by private companies with adequate sources of liquidity
to support the business’s ongoing operations qualify for a PPP loan?
Answer: See response to FAQ #31. 14
38. Question: Section 1102 of the CARES Act provides that PPP loans are available only to
applicants that were “in operation on February 15, 2020.” Is a business that was in
operation on February 15, 2020 but had a change in ownership after February 15, 2020
eligible for a PPP loan?
Answer: Yes. As long as the business was in operation on February 15, 2020, if it meets
the other eligibility criteria, the business is eligible to apply for a PPP loan regardless of
the change in ownership. In addition, where there is a change in ownership effectuated
through a purchase of substantially all assets of a business that was in operation on
February 15, the business acquiring the assets will be eligible to apply for a PPP loan
even if the change in ownership results in the assignment of a new tax ID number and
even if the acquiring business was not in operation until after February 15, 2020. If the
acquiring business has maintained the operations of the pre-sale business, the acquiring
business may rely on the historic payroll costs and headcount of the pre-sale business for
the purposes of its PPP application, except where the pre-sale business had applied for
and received a PPP loan. The Administrator, in consultation with the Secretary, has
determined that the requirement that a business “was in operation on February 15, 2020”
should be applied based on the economic realities of the business’s operations.
39. Question: Will SBA review individual PPP loan files?
Answer: Yes. In FAQ #31, SBA reminded all borrowers of an important certification
required to obtain a PPP loan. To further ensure PPP loans are limited to eligible
borrowers in need, the SBA has decided, in consultation with the Department of the
Treasury, that it will review all loans in excess of $2 million, in addition to other loans as
appropriate, following the lender’s submission of the borrower’s loan forgiveness
application. Additional guidance implementing this procedure will be forthcoming.
13
Questions 36 published April 26, 2020.
14
Question 37 published April 28, 2020.
13
As of October 7, 2020
The outcome of SBA’s review of loan files will not affect SBA’s guarantee of any loan
for which the lender complied with the lender obligations set forth in paragraphs
III.3.b(i)-(iii) of the Paycheck Protection Program Rule (April 2, 2020) and further
explained in FAQ #1. 15
40. Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of
the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower
laid off an employee, offered to rehire the same employee, but the employee declined the
offer?
Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under
Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis
exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue
an interim final rule excluding laid-off employees whom the borrower offered to rehire
(for the same salary/wages and same number of hours) from the CARES Act’s loan
forgiveness reduction calculation. The interim final rule will specify that, to qualify for
this exception, the borrower must have made a good faith, written offer of rehire, and the
employee’s rejection of that offer must be documented by the borrower. Employees and
employers should be aware that employees who reject offers of re-employment may
forfeit eligibility for continued unemployment compensation.
41. Question: Can a seasonal employer that elects to use a 12-week period between May 1,
2019 and September 15, 2019 to calculate its maximum PPP loan amount under the
interim final rule issued by Treasury on April 27, 2020, make all the required
certifications on the Borrower Application Form?
Answer: Yes. The Borrower Application Form requires applicants to certify that “The
Applicant is eligible to receive a loan under the rules in effect at the time this application
is submitted that have been issued by the Small Business Administration (SBA)
implementing the Paycheck Protection Program.” On April 27, 2020, Treasury issued an
interim final rule allowing seasonal borrowers to use an alternative base period for
purposes of calculating the loan amount for which they are eligible under the PPP. An
applicant that is otherwise in compliance with applicable SBA requirements, and that
complies with Treasury’s interim final rule on seasonal workers, will be deemed eligible
for a PPP loan under SBA rules. Instead of following the instructions on page 3 of the
Borrower Application Form for the time period for calculating average monthly payroll
for seasonal businesses, an applicant may elect to use the time period in Treasury’s
interim final rule on seasonal workers.
42. Question: Do nonprofit hospitals exempt from taxation under section 115 of the Internal
Revenue Code qualify as “nonprofit organizations” under section 1102 of the CARES
Act?
Answer: Section 1102 of the CARES Act defines the term “nonprofit organization” as
“an organization that is described in section 501(c)(3) of the Internal Revenue Code of
15
Questions 38 – 39 published April 29, 2020.
14
As of October 7, 2020
1986 and that is exempt from taxation under section 501(a) of such Code.” The
Administrator, in consultation with the Secretary of the Treasury, understands that
nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code
are unique in that many such hospitals may meet the description set forth in section
501(c)(3) of the Internal Revenue Code to qualify for tax exemption under section 501(a),
but have not sought to be recognized by the IRS as such because they are otherwise fully
tax-exempt under a different provision of the Internal Revenue Code.
Accordingly, the Administrator will treat a nonprofit hospital exempt from taxation under
section 115 of the Internal Revenue Code as meeting the definition of “nonprofit
organization” under section 1102 of the CARES Act if the hospital reasonably
determines, in a written record maintained by the hospital, that it is an organization
described in section 501(c)(3) of the Internal Revenue Code and is therefore within a
category of organization that is exempt from taxation under section 501(a). 16 The
hospital’s certification of eligibility on the Borrower Application Form cannot be made
without this determination. This approach helps accomplish the statutory purpose of
ensuring that a broad range of borrowers, including entities that are helping to lead the
medical response to the ongoing pandemic, can benefit from the loans provided under the
PPP.
This guidance is solely for purposes of qualification as a “nonprofit organization” under
section 1102 of the CARES Act and related purposes of the CARES Act, and does not
have any consequences for federal tax law purposes. Nonprofit hospitals should also
review all other applicable eligibility criteria, including the Interim Final Rules on
Promissory Notes, Authorizations, Affiliation, and Eligibility (April 28, 2020) regarding
an important limitation on ownership by state or local governments. 85 FR 23450,
23451. 17
43. Question: FAQ #31 reminded borrowers to review carefully the required certification on
the Borrower Application Form that “[c]urrent economic uncertainty makes this loan
request necessary to support the ongoing operations of the Applicant.” SBA guidance
and regulations provide that any borrower who applied for a PPP loan prior to April 24,
2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made
the required certification in good faith. Is it possible for a borrower to obtain an
extension of the May 7, 2020 repayment date?
Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020.
Borrowers do not need to apply for this extension. This extension will be promptly
implemented through a revision to the SBA’s interim final rule providing the safe harbor.
16
This determination need not account for the ancillary conditions set forth in section 501(r) of the Internal Revenue
Code and elsewhere associated with securing the tax exemption under that section. Section 501(r) states that a
hospital organization shall not be treated as described in section 501(c)(3) unless it meets certain community health
and other requirements. However, section 1102 of the CARES Act defines the term “nonprofit organization” solely
by reference to section 501(c)(3), and section 501(r) does not amend section 501(c)(3). Therefore, for purposes of
the PPP, the requirements of section 501(r) do not apply to the determination of whether an organization is
“described in section 501(c)(3).”
17
Questions 40 – 42 published May 3, 2020.
15
As of October 7, 2020
SBA intends to provide additional guidance on how it will review the certification prior
to May 14, 2020.
44. Question: How do SBA’s affiliation rules at 13 C.F.R. 121.301(f) apply with regard to
counting the employees of foreign and U.S. affiliates?
Answer: For purposes of the PPP’s 500 or fewer employee size standard, an applicant
must count all of its employees and the employees of its U.S and foreign affiliates, absent
a waiver of or an exception to the affiliation rules. 13 C.F.R. 121.301(f)(6). Business
concerns seeking to qualify as a “small business concern” under section 3 of the Small
Business Act (15 U.S.C. 632) on the basis of the employee-based size standard must do
the same. 18
45. Question: Is an employer that repays its PPP loan by the safe harbor deadline (May 18,
2020) eligible for the Employee Retention Credit?
Answer: Yes. An employer that applied for a PPP loan, received payment, and repays
the loan by the safe harbor deadline (May 18, 2020) will be treated as though the
employer had not received a covered loan under the PPP for purposes of the Employee
Retention Credit. Therefore, the employer will be eligible for the credit if the employer
is otherwise an eligible employer for purposes of the credit. 19
46. Question: How will SBA review borrowers’ required good-faith certification concerning
the necessity of their loan request?
Answer: When submitting a PPP application, all borrowers must certify in good faith
that “[c]urrent economic uncertainty makes this loan request necessary to support the
ongoing operations of the Applicant.” SBA, in consultation with the Department of the
Treasury, has determined that the following safe harbor will apply to SBA’s review of
PPP loans with respect to this issue: Any borrower that, together with its affiliates, 20
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.
SBA has determined that this safe harbor is appropriate because borrowers with loans
below this threshold are generally less likely to have had access to adequate sources of
liquidity in the current economic environment than borrowers that obtained larger
loans. This safe harbor will also promote economic certainty as PPP borrowers with
more limited resources endeavor to retain and rehire employees. In addition, given the
large volume of PPP loans, this approach will enable SBA to conserve its finite audit
18
Questions 43 – 44 published May 5, 2020.
19
Question 45 published May 6, 2020; revised May 27, 2020 to change the date from “(May 14, 2020)” to “(May
18, 2020).”
20
For purposes of this safe harbor, a borrower must include its affiliates to the extent required under the interim final
rule on affiliates, 85 FR 20817 (April 15, 2020).
16
As of October 7, 2020
resources and focus its reviews on larger loans, where the compliance effort may yield
higher returns.
Importantly, borrowers with loans greater than $2 million that do not satisfy this safe
harbor may still have an adequate basis for making the required good-faith certification,
based on their individual circumstances in light of the language of the certification and
SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and
other PPP loans as appropriate, will be subject to review by SBA for compliance with
program requirements set forth in the PPP Interim Final Rules and in the Borrower
Application Form. If SBA determines in the course of its review that a borrower lacked
an adequate basis for the required certification concerning the necessity of the loan
request, SBA will seek repayment of the outstanding PPP loan balance and will inform
the lender that the borrower is not eligible for loan forgiveness. If the borrower repays
the loan after receiving notification from SBA, SBA will not pursue administrative
enforcement or referrals to other agencies based on its determination with respect to the
certification concerning necessity of the loan request. SBA’s determination concerning
the certification regarding the necessity of the loan request will not affect SBA’s loan
guarantee.
47. Question: An SBA interim final rule posted on May 8, 2020 provided that any borrower
who applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed
by SBA to have made the required certification concerning the necessity of the loan
request in good faith. Is it possible for a borrower to obtain an extension of the May 14,
2020 repayment date?
Answer: Yes, SBA is extending the repayment date for this safe harbor to May 18,
2020, to give borrowers an opportunity to review and consider FAQ #46. Borrowers do
not need to apply for this extension. This extension will be promptly implemented
through a revision to the SBA’s interim final rule providing the safe harbor. 21
48. Question: What is the deadline for lenders to complete the initial SBA Form 1502
reporting process?
Answer: SBA is extending the deadline for lenders to submit the initial SBA Form
1502. Under SBA’s interim final rule on disbursements, posted April 28, 2020, lenders
must disburse PPP loans within 10 calendar days of loan approval; a loan is considered
approved when the loan is assigned a loan number by SBA. That interim final rule also
provides that loans for which funds have not been disbursed because a borrower has not
submitted required loan documentation within 20 calendar days of loan approval shall be
cancelled by the lender. 22 Previously, the deadline for lenders’ submission of the initial
SBA Form 1502 reporting information was May 22, 2020. 23 SBA is extending the
deadline for lenders to electronically upload the initial SBA Form 1502 reporting
information to the later of: (1) May 29, 2020, or (2) 10 calendar days after disbursement
21
Questions 46 – 47 published May 13, 2020.
22
85 FR 26321, 26322-23.
23
85 FR 29845, 29846.
17
As of October 7, 2020
or cancellation of the PPP loan. This extension of the timeline for the initial SBA Form
1502 reporting information will be promptly implemented through revisions to SBA’s
interim final rules providing an extension to the certification safe harbor and the deadline
for SBA Form 1502 reporting. 24
49. Question: What is the maturity date of a PPP loan?
Answer: If a PPP loan received an SBA loan number on or after June 5, 2020, the loan
has a five-year maturity. If a PPP loan received an SBA loan number before June 5,
2020, the loan has a two-year maturity, unless the borrower and lender mutually agree to
extend the term of the loan to five years. The promissory note for the PPP loan will state
the term of the loan. 25
50. Question: What effect does the payment or nonpayment of fees of an agent or other
third party have on SBA’s guarantee of a PPP loan or SBA’s payment of fees to lenders?
Answer: The payment or nonpayment of fees of an agent or other third party is not
material to SBA’s guarantee of a PPP loan or to SBA’s payment of fees to lenders.
Additional information about such fees can be found in paragraph III.4.c of the initial
Paycheck Protection Program interim final rule (link).
51. Question: Do payments required for the provision of group health care benefits,
including insurance premiums, include vision and dental benefits?
Answer: Yes. 26
52. Question: The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act)
extended the deferral period for borrower payments of principal, interest, and fees on all
PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the
lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of
the borrower’s loan forgiveness covered period). Previously, the deferral period could
end after 6 months. Are lenders and borrowers required to modify promissory notes used
for PPP loans to reflect the extended deferral period?
Answer: The extension of the deferral period under the Flexibility Act automatically
applies to all PPP loans. Lenders are required to give immediate effect to the statutory
extension and should notify borrowers of the change to the deferral period. SBA does not
require a formal modification to the promissory note. A modification of a promissory
note to reflect the required statutory deferral period under the Flexibility Act will have no
effect on the SBA’s guarantee of a PPP loan. 27
24
Question 48 published May 19, 2020.
25
Question 49 published June 25, 2020.
26
Questions 50 – 51 published August 11, 2020.
27
Question 52 published October 7, 2020.
18
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