Tuesday 02/23/2021

Second-Draw PPP Loans Affiliation Rules

As businesses move forward in applying for a second-draw Paycheck Protection Program loan, or PPP2, it is important to remember the maximum loan size is capped at $2 million for businesses, as well as their affiliates. That means the total amount a business and its affiliates can apply for is capped at $2 million. Businesses are also only eligible if collectively with their affiliates the employee count is below 300.

For purposes of the PPP loans, per the U.S. Small Business Administration (SBA), an affiliate is determined based on any of the following four tests being met:

  1. Affiliated based on ownership – based on owning or controlling more than 50 percent of the entity’s voting equity
  2. Affiliation arising under stock options, convertible securities, and agreements to merge
  3. Affiliation based on management – CEO or President of the applicant also controls the management of another entity. Directors or management of one entity also controls the Board of Directors or management of one or more other entity. Affiliation also arises where a single individual or entity controls the management of the applicant through a management agreement
  4. Affiliated based on identify of interest – Identity of interest between close relatives such as husband and wife or kids with identical or substantially, identical business or economic interests

If you have multiple businesses applying for PPP2, you need to determine if your businesses are considered affiliates so you do not receive loans in excess of $2 million or exceed the 300 employees cap. You will be responsible for repaying any misattributed funds you receive.

We’re Here to Help

The professionals at Corrigan Krause can help you navigate the standards and stipulations of PPP loans and more. Email ckcrisisteam@corrigankrause.com for more information.

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