SBA Issues Interim Final Rule; PPP Guidance for Hedge Funds, Private Equity and Portfolio Companies
The Small Business Administration (“SBA”) issued an additional Interim Final Rule (the “Rule”) on the Paycheck Protection Program (“PPP”) clarifying eligibility for hedge funds, private equity firms, portfolio companies, and hospitals receiving government funding. The Rule also sets up a safe harbor for certification concerning need for the PPP, as set forth in the FAQs from yesterday.
The Rule states that hedge funds and private equity firms are not eligible to receive PPP loans as they are primarily engaged in investment or speculation. This does not necessarily mean that portfolio companies of private equity funds are ineligible. Portfolio companies must apply the affiliation rules and review the economic uncertainty certification to ensure that they are eligible.
The Rule also clarifies that hospitals or nonprofits that are owned by governmental entities may be eligible if the entity receives less than 50% of its funding from state or local government sources, exclusive of Medicaid.
In addition to the above, eligibility for businesses participating in ESOPs and gambling is addressed in the Rule. The Rule also clarifies that businesses in bankruptcy proceedings are not ineligible to receive PPP loans.
Businesses that determine that they are ineligible based on need may pay back the loan by May 7, 2020 and be deemed to have made the certification related to need in good faith. This confirms the FAQ issued yesterday.
The text of the Interim Final Rule is available HERE.