On April 6, 2020, the Department of the Treasury and The United States Small Business Administration (the “SBA”) issued guidance with respect to the Paycheck Protection Program loans (“PPP Loans”) under the CARES Act (the “Guidance”). The Guidance is in the form of questions and answers. One of the businesses that is eligible for a PPP Loan is a “small business concern” as defined in the Small Business Act. The Guidance clarifies that a company that meets the definition of a small business concern under the current SBA rules may apply for a PPP Loan even if it has more than 500 employees. Consequently, if a business meets the definition of a small business concern, it is eligible to apply for a PPP Loan. Additionally, a company can qualify for a PPP Loan as a small business concern if it meets the “alternate size standard” described below.

A small business concern is generally a business that is independently owned and operated and located in the United States, not dominant in its field, does not exceed the relevant size standard established by the SBA for its industry (based on the North American Industry Classification System or NAISC), and contributes to the United States economy by paying taxes and using American labor and materials. The Guidance provides that a company can qualify for a PPP Loan as a small business concern, even if it has more than 500 employees, if it meets the so-called “alternate size standard” as of March 27, 2020. The alternate size standard means that (i) the maximum tangible net worth of the business is not more than $15 million and (ii) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two (2) full fiscal years before the date of application for the PPP Loan is not more than $5 million.

A company that otherwise meets the small business concern rules does not have to satisfy the alternate size standard requirements. These alternate size standard requirements just apply to businesses that do not otherwise meet the definition of a small business concern.

The Banking and Finance attorneys at Dvorak Law Group have the knowledge and experience to efficiently assist our clients with financing needs. Please contact Dvorak Law Group for specific questions and recommendations regarding how PPP Loans may assist your business and with help in the application process.