On April 30, 2020, the U.S. Treasury released a new Interim Final Rule for the Paycheck Protection Program (“PPP”), establishing a $20 million aggregate maximum for PPP loans issued to businesses that are part of a “single corporate group” (defined below). The rule can be found here. The Treasury justifies the rule as a measure to “preserve finite appropriations for PPP loans,” believing that “limiting the amount of PPP loans that any single corporate group may receive will promote the availability of PPP loans to the largest possible number of borrowers.”
The new rule, in part, establishes a $20 million aggregate maximum for PPP loans issued to businesses that are part of a “single corporate group.” The rule states that “businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent.” The $20 million limitation applies even to those businesses not considered affiliates under the SBA’s affiliation rules.
The $20 million limitation is effective with respect to any loan that has not been fully disbursed as of April 30, 2020. Thus, the limit applies to loans disbursed after April 30, and also applies where partial loan disbursement occurred on or before April 30 and any additional disbursement after April 30 would cause a single corporate group to exceed $20 million.
As with other of its rules and guidance, the Treasury cautions that the loan applicant – and not the applicant’s lender – is responsible for complying with this rule. Any applicant that applied or receives PPP loans in a manner that violates this rule must “withdraw or request cancellation of any pending PPP loan application or approved PPP loan not in compliance” with the rule’s limitation. Failure to do so will be deemed an unauthorized use of PPP funds, and the loan will not be eligible for forgiveness.
Any applicant that has not yet received a PPP loan in full should consider its ownership structure in light of this rule, including by determining whether it is part of a “single corporate group” and whether other businesses within that group have received or are applying for PPP loans.