The Real Estate Roundtable Urges Treasury, SBA to Clarify CARES Act Small Business Loan Issues
April 1, 2020
This week the Real Estate Roundtable wrote to the U.S. Treasury Department and the Small Business Administration asking to liberally construe its PPP authorities and effectuate Congress’s intent by providing as much loan assistance as possible, to as many small businesses as possible.
As the Administration is on a fast-track to develop rules that implement the PPP, we recommend the following principles and clarifications. The points below reflect the numerous questions we have received from our members trying to determine whether their businesses are eligible under the new loan program:
1. Reduce the amount of loan forgiveness where a borrower avoids, but has the financial ability to pay for, contractual obligations during the “covered period."
2. Flexibility is needed regarding the percentage of forgiveness afforded to particular eligible loan uses.
3. Implement the broadest possible waiver of SBA’s affiliation rules10 for the widest spectrum of business sectors and structures.
4. Confirm that “any business concern” with not more than 500 employees is eligible for its own individual PPP loan “per physical location,” 11 as duly formed under State incorporation and partnership laws.
5. Confirm that “any business concern operating as a franchise and assigned a franchise identifier code”14 is eligible for a covered loan – regardless of its industry sector – and is temporarily exempt from the affiliation rules.
6. Confirm that small business “start-ups” with equity investors are not excluded from the 7(a) emergency loan program because of the “affiliation rules.”
7. Confirm that capital injections from 20% equity owners are not required under the CARES Act.
8. Confirm that payroll costs for workers re-hired after February 15, 2020 can be forgiven.
9. Confirm that rent obligations under a lease modified after February 15 – but which derives from an original pre-February 15 lease – are still “covered” for forgiveness purposes.
10. The 500-employee limit should be based on full-time employees.
11. Provide businesses with flexibility to measure employment at the level of the management/operating business or the underlying business with the financial obligation for payroll costs.
12. Confirm that “alternative size standards” do not pre-empt CARES Act eligibility rules.
13. Clarify the relationship between the bill’s text allowing a business concern to include payments of compensation to independent contractors within covered “payroll costs,”23 with the separate text that renders an independent contractor itself eligible to receive a covered loan for wages and other allowable uses.