Billions of dollars remain in the Paycheck Protection Program (PPP) created to provide businesses relief during the COVID-19 pandemic. With the application deadline extended to August 8, 2020, some companies should consider taking an additional look into their PPP loan eligibility.
In addition to the extended application deadline, Public Law 116-142—known as the Paycheck Protection Program Flexibility Act and signed into law on June 5, 2020—extended the covered period, or the time a borrower has to spend the loan proceeds; added additional safe harbors; and extended existing safe harbors to December 31, 2020. This increases the likelihood that a PPP loan will be forgiven in its entirety.
While the program focuses on businesses with 500 or fewer employees, some businesses with higher staff numbers could still be eligible. Below, we explore why your business might want to reconsider applying for PPP loans and eligibility requirements.
During the initial months of the disruption brought by COVID-19, many companies needed to focus on immediate operational and health concerns.
This potentially could have limited your available time and resources to fully evaluate PPP loan eligibility initially, specifically if your business has over 500 employees. If your business adapted to meet immediate concerns, now is a good time to reconsider if loan options are a good fit to help keep your business moving forward in the long-term.
Exception to the 500 Employees Rule
Certain companies could qualify due to an exception published in the Small Business Administration (SBA) and the Department of the Treasury’s Frequently Asked Questions (FAQs) guidance.
The guidance notes that small businesses “can be eligible borrowers even if they have more than 500 employees, as long as they satisfy the existing statutory and regulatory definition of a small business concern under section 3 of the Small Business Act, 15 U.S.C. 632.” The guidance is updated on the SBA website as of June 25, 2020.
Meeting Employee-Sized Standards
Certain businesses with over 500 employees, as defined by the SBA in specific industries, can qualify if certain employee-based or revenue-sized standards are met.
To determine if your business could qualify as a small business concern, the SBA Table of Small Business Size Standards must be evaluated. The Small Business Size table matches specific industries described in the North American Industry Classification System (NAICS) codification system.
There are many potential industry-specific exceptions permitting over 500 employees for select companies within an industry such as:
- Apparel, machinery, computer and electronic product, transportation equipment and other manufacturing companies
- Wired and wireless telecommunication carriers
- Electric power and natural gas distribution
- Support activities for oil and gas operations and certain mining, quarrying, and oil and gas businesses
Additional Eligibility Criteria
It’s important to note that small business concern is just the starting point to determine if your business is eligible for PPP loans.
Several other eligibility criteria must be met, including liquidity determinations or access to capital, as well as affiliation rules governing commonly owned or controlled enterprises.
While other criteria may prohibit businesses receiving PPP loans, it’s highly advised that companies reevaluate whether or not they can apply because the PPP Act has enhanced the program. Some benefits include:
- The potential forgiveness of the loan
- The extended five-year maturity date afforded by the PPP Flexibility Act on the portion not forgiven
- Relatively low interest rates
We’re Here to Help
To learn more about PPP loans, contact your Moss Adams professional.
For regulatory updates, strategies to help cope with subsequent risk, and possible steps to bolster your workforce and organization, please see the following resources: