The Small Business Administration has published yet another Interim Final Regulation for the PPP loan program.[1] While much of the document relates to issues of interest to non-bank lenders, one key piece of guidance was issued that limits the amount of loans for corporate groups.

The guidance provides the following specific limit:

1. Can a single corporate group receive unlimited PPP loans?

No. To preserve the limited resources available to the PPP program, and in light of the previous lapse of PPP appropriations and the high demand for PPP loans, businesses that are part of a single corporate group shall in no event receive more than $20,000,000 of PPP loans in the aggregate. For purposes of this limit, businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent. This limitation shall be immediately effective with respect to any loan that has not yet been fully disbursed as of April 30, 2020.

It is the responsibility of an applicant for a PPP loan to notify the lender if the applicant has applied for or received PPP loans in excess of the amount permitted by this interim final rule and withdraw or request cancellation of any pending PPP loan application or approved PPP loan not in compliance with the limitation set forth in this rule. Failure by the applicant to do so will be regarded as a use of PPP funds for unauthorized purposes, and the loan will not be eligible for forgiveness. A lender may rely on an applicant’s representation concerning the applicant’s compliance with this limitation.

The Administrator, in consultation with the Secretary, determined that limiting the amount of PPP loans that a single corporate group may receive will promote the availability of PPP loans to the largest possible number of borrowers, consistent with the CARES Act. The Administrator has concluded that a limitation of $20,000,000 strikes an appropriate balance between broad availability of PPP loans and program resource constraints.

SBA’s affiliation rules, which relate to an applicant’s eligibility for PPP loans, and any waiver of those rules under the CARES Act, continue to apply independent of this limitation. Businesses are subject to this limitation even if the businesses are eligible for the waiver-of affiliation provision under the CARES Act or are otherwise not considered to be affiliates under SBA’s affiliation rules.

This rule has no effect on lender obligations required to obtain an SBA guarantee for PPP loans.

This guidance has a significant footnote that justifies the SBA’s authority, at least in the agency’s view, to write such a rule into the program:

The Administrator has authority to issue “such rules and regulations as [the Administrator] deems necessary to carry out the authority vested in him by or pursuant to” 15 U.S.C. Chapter 14A, including authorities established under section 1102 of the CARES Act. Section 1102 provides that the Administrator “may” guarantee loans under the terms and conditions set forth in section 7(a) of the Small Business Act, and those conditions specify a “maximum” – but not a minimum – loan amount. See 15 U.S.C. § 636(a)(36)(B), (E); see also CARES Act section 1106(k) (authorizing SBA to issue regulations to govern loan forgiveness). To preserve finite appropriations for PPP loans and ensure broad access for eligible borrowers, the Administrator, in consultation with the Secretary, has determined that an aggregate limitation on loans to a single corporate group is necessary and appropriate.

[1] RIN 3245-AH39, “Business Loan Program Temporary Changes; Paycheck Protection Program – Requirements – Corporate Groups and Non-Bank and Non-Insured Depository Institution,” Small Business Administration, April 30, 2020, https://home.treasury.gov/system/files/136/IFR--Corporate-Groups-and-Non-Bank-and-Non-Insured-Depository-Institution-Lenders.pdf (retrieved April 30, 2020)