Given the current situation, more small businesses than usual have found themselves in need of financial assistance. As a result, the SBA has relaxed affiliation rules regarding PPP loans for their interim rule, but there are still restrictions.

Those with multiple affiliated firms are particularly confused about whether some, all, or none of their businesses qualify for these loans. Fortunately, while there is no single answer, determining whether or not your business qualifies for these loans isn’t too difficult. According to the SBA, “An entity generally is eligible for the PPP if it, combined with its affiliates, is a small business, as defined by section 3 of the Small Business Act (15 U.S.C. 632).”

The most notable qualification of being a small business according to the SBA is having 500 or fewer employees within one’s business. Under affiliation guidelines, a business that is affiliated with other businesses, whether it owns them or vice versa, must have less than 500 employees between all affiliated businesses. The significant exception to this is business in the food service industry who, regardless of affiliation, qualify for PPP loans for each business as long as total employees for each location is lower than 500.

Even if a business, with its affiliates, exceeds 500 employees, some businesses could still be eligible for a PPP Loan through SBA’s applicable size standards using the SBA size standard tool.

The most frequently asked question and least understood part of the Payroll Protection Plan (PPP) forgiveness is the concept of Equivalent Full Time Employees (FTE). We are helping our clients to ensure full forgiveness and tackling this particular hurdle. Call with us if you have questions about your own FTE calculations.

Briefly, the forgiveness amount may be reduced based on a reduction in full-time equivalent in the 8 weeks period following the origination of the loan compared to the number of full-time equivalent from 2/15/19 through 6/30/19, or, alternatively, 1/1/20 through 2/29/20.

These calculations should be performed as soon as possible to understand how changes in your workforce over the 8 weeks following loan origination will impact the forgiveness of your PPP loan.

If you would like help calculating your full-time equivalent, please give us a call at 858 367-3112 or schedule a meeting here.