Businesses Must Have Fewer than 500 Employees or Meet the ‘Size Standard’ Requirement for Their Industry. Under the SBA’s affiliation rules, as set forth in 13 C.F.R. The U.S. Small Business Administration (“SBA”) recently published a memorandum (the “Memorandum”) and new Frequently Asked Questions (“FAQs”) (available here) clarifying the size standards and affiliation rules applicable to the Paycheck Protection Program (the “Program” or “PPP”). SBA will consider the totality of the circumstances, including criteria used by the IRS for Federal income tax purposes, in determining … Employee Calculation and Affiliation Rules Under SBA Regulations. SBA’s size standards govern whether a business is eligible for loans administered by the SBA, such as the EIDL, PPP Loan, and other Business Loan programs under … SBA’s existing affiliation exclusions apply to the PPP, New York City. Clarification of Eligibility Requirements. April 9, 2020 Expanded SBA Size Standards Eligibility Under PPP Loan. One major component to the PPP Loan that is easily misinterpreted is the rule regarding SBA’s size standards for eligibility, leaving potential relief for countless businesses on the table. This alert provides an overview of the SBA's size and affiliation rules. For now, the SBA has indicated that the normal affiliation standards for SBA 7(a) loans, as set out in 13 C.F.R. ), Who’s Eligible for the Paycheck Protection SBA Loans? If you’re an independent contractor or otherwise self-employed, you can start applying on April 10. Under the PPP Loan, the SBA considers a business “small” if it meets the one of the criteria based on three different measurements for size standards: 1) employee-based measurement; 2) revenue-based measurement; or 3) alternative-based measurement. § 121.103, the SBA will aggregate a business concern and all affiliated companies to calculate size under the size standards. The SBA notes this is typically the average monthly payroll for 2019, excluding costs over $100,000 on “an annualized basis for each employee.” For seasonal businesses, you can use an average monthly payroll for February 15, 2019 to June 30, 2019. Disclosure: We would like to hear from you, but cannot represent you unless we know that doing so would not create a conflict of interest, or would require us to practice law in states or courts where we are not licensed to practice or give advice. Under section 3(a)(2)(C)(ii) of the Small Business Act, as amended, an agency without separate statutory authority to issue size standards must satisfy three requirements to prescrib… CLICK TO DOWNLOAD Aug 2019 Version. Loan payments will also be deferred for six months. Additionally, affiliation rules apply, and if applicable, the size of the applicant combined with its affiliates must not exceed the size standard designated for either the primary industry of the applicant alone or the primary industry of the applicant and its affiliates, whichever is higher. According to the SBA, a loan will only be forgiven if at least 75% of the forgiven part is used for payroll expenses. Method 1: SBA Employee-Based Size Standards. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.”, The SBA notes: “The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Public Law 115-324 (the “Small Business Runway Extension Act of 2018”) amended section 3(a)(2)(C)(ii)(II) of the Small Business Act, 15 U.S.C. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Is Enacted Into Law, Back to Basics: SBA Size Standards Eligibility Under The Paycheck Protection Program (PPP Loan), More than 500 employees but less than employee-based threshold established by the NAICS Code for the applicant’s industry (, Average annual receipts for last three full fiscal years is less than revenue-based threshold established by the NAICS Code for the applicant’s industry (, Maximum tangible net worth of the business is not more than $15 million; and. To help small business owners assess their small business status, SBA has established a Table of Small Business Size Standards. SBA also includes the table of size standards in the Small Business Size Regulations, 13 CFR § 121.201. On April 6, the Small Business Administration (“SBA”) provided an “alternative size standard” under which employers may qualify under the PPP program. 632(a)(2)(C)(ii)(II), to modify the requirements for proposed small business size standards prescribed by an agency without separate statutory authority to issue size standards. You can see the size standards on the SBA’s website here. ... (NAICS Code 211130) with 1,000 employees would still be eligible for PPP funds because the applicable SBA employee-based size standard is 1,250. How to calculate average annual receipts and average employment of a firm can be found in 13 CFR § 121.104 and 13 CFR § 121.106, respectively. You’ll need to search for your NAICS code and then enter your three-year average for annual receipts/revenue (generally total receipts/revenue plus cost of goods sold over three years). Getty Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. SBA.COM® PAYCHECK PROTECTION PROGRAM (PPP) INFORMATION SHEET: This is a modified version of the official PPP Information Sheet published by the U.S. Department of Treasury here on April 3, 2020. One of the most important rules addresses the size of eligible businesses, referred to as the size standards. One intent of the PPP Loan is to provide economic relief to as many small businesses affected by COVID-19 as possible. What Counts Towards 500? What Counts Towards 500? Since April 3, 2020, the SBA has provided guidance relating to the PPP, including guidance titled "Affiliation Rules Applicable to U.S. Small Business Administration Paycheck Protection Program," and a Letter Re: Size Eligibility and Affiliation Under the CARES Act. According to the new rule and FAQ #44, all employees of affiliates are to be counted for purposes of determining if the SBA’s employee size standards are met for purposes of PPP eligibility. Under general SBA regulations, to be considered “small,” the size of the business alone must not exceed the size standard designated for the industry in which the applicant is primarily engaged. Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. The principal place of residence of the employee is not relevant for purposes of this headcount. In an effort to achieve the goals of the PPP Loan, the SBA has consolidated all of its applicable size standards, new and old, in an effort to expand eligibility and relief under the CARES Act. Employee Calculations and Affiliation Rules Under SBA Regulations. Use the Document Below to Find the SBA Size Standards based on Total Employees or Dollars for any given NAICS Code. Under the PPP Loan, a business is considered “small” if it meets one of the criteria based on three different measurements for size standards: 1) employee-based measurement; 2) revenue-based measurement; or 3) alternative-based measurement. Click for PDF. Additionally, farms can qualify for PPP if it meets SBAs alternative size standard. We support America's small businesses. According to Smart Asset, loans can be for up to $10 million, for two times the cost of payroll plus 25%. Dozens of … To qualify as a “small business” for the purpose of the Paycheck Protection Program, a business must have fewer than 500 employees, whether small businesses, sole proprietors, LLCs, S or C corporations, self-employed or contractors. In general, companies may be eligible under the PPP (if they are not disqualified by the SBA's affiliation rules) if they (a) have fewer than 500 employees (or an alternative SBA size standard based on industry), (b) were in operation on February 15, 2020 and (c) have suffered business disruption as a result of COVID-19. The PPP is administered as part of the SBA's 7(a) loan program. On April 2, 2020, the U.S. Small Business Administration (SBA) released an interim final rule (the Initial Rule) announcing the SBA’s formal interpretation of the implementation of the Paycheck Protection Program (PPP), which was created by Sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).. As far as who’s eligible for the loan forgiveness part, that is going to apply to expenses for eight weeks from when the loan starts. Employee Calculations and Affiliation Rules Under SBA Regulations. Size Matters When Determining Eligibility. SBA size standards have been established for most economic activity, or industries, under the North American Industry Classification System (NAICS). It was published as Question #44 in the Paycheck Protection Program Loans Frequently Asked Questions (FAQs). In an effort to achieve this goal, the SBA consolidated all of its applicable size standards, new and old, in an effort to expand eligibility and relief. Money spent on payroll, utilities, rent or mortgage debt interest qualifies. | Authored Article 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. 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