SBA Sets $20 Million Cap for Loans to a Single Corporate Group
April 30, 2020
The SBA yesterday supplemented the interim final rules by limiting the amount of PPP loans that any single corporate group may receive.
According to the amended rules, businesses that are part of a “single corporate group” may not receive more than $20 million of PPP loans in the aggregate. 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.
This limitation shall be immediately effective with respect to any loan that has not yet been fully disbursed as of April 30, 2020. For loans that have been partially disbursed, this limitation applies to any additional disbursement that would cause the total PPP loans to a single corporate group to exceed $20 million.
The rules explain that it is the responsibility of an applicant for a PPP loan to notify the lender if the applicant has applied for, or has received, PPP loans in excess of the amount permitted by the new interim final rule; it is also the applicant’s responsibility to withdraw, or to request cancellation of, any pending PPP loan application or approved PPP loan not in compliance with the limitation set forth above.
Failure by the applicant to do so will be regarded by the SBA as a use of PPP funds for unauthorized purposes, and the loan will not be eligible for forgiveness.
The SBA again affirmed that a lender may rely on an applicant’s representation, this time concerning the applicant’s compliance with this limitation.
The SBA’s affiliation rules, which relate to an applicant’s eligibility for PPP loans, and any waiver of those rules under the CARES Act (for example, for hotels), will continue to apply independently of this limitation.
Businesses are subject to this limitation even if the businesses are eligible for the waiver-of-affiliation provision under the CARES Act, or are otherwise not considered to be affiliates under the SBA’s affiliation rules.