The CARES Act created the Paycheck Protection Program (“PPP”), which amended the Small Business Act (“SBA”) to provide short term loans to companies with fewer than 500 employees and other companies (such as those in the restaurant and hospitality industry). Such loans may be eligible for full forgiveness if used for payroll and other business expenses and all other statutory requirements are met. The SBA continues to issue guidance on a rolling basis, which can impact a company’s eligibility for the loan, use of the loan, and the level of forgiveness
Entities with Foreign Employees Guidance
On May 18, 2020, the SBA posted an interim final rule mandating that foreign employees and employees of foreign affiliates must be included in employee headcount for purposes of determining PPP loan eligibility based on size. However, the SBA provided a safe harbor for borrowers who applied for a PPP loan prior to May 5, 2020. These borrowers will not be found to be ineligible based on the borrower’s exclusion of non-U.S. employees from the borrower’s calculation of its employee headcount if the borrower (together with its affiliates) had no more than 500 employees whose principal place of residence is in the United States. This comes on the heels of a May 5, 2020, FAQ stating that: “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.” Prior to this FAQ, the SBA issued guidance stating that an entity is eligible for a PPP loan if it has 500 or fewer employees whose principal place of residence is in the United States. The SBA noted that such guidance caused reasonable borrower confusion which necessitated the foregoing safe harbor. The SBA further mandated that under no circumstances may PPP funds be used to support non-U.S. workers or operations.
FordHarrison's PPP team will continue to monitor the release of new guidance and provide such updates on a regular basis as guidance continues to roll out.
