January 19, 2021

Volume XI, Number 19


January 18, 2021

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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.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 116



About this Author

Phil Feigen of the Polsinelli Law Firm Corporate Transaction Attorney, in Washington DC
Office Managing Partner

Phil Feigen brings a unique perspective to providing general corporate advice, as well as complex business counsel to clients in ever-changing regulatory environments.  For more than 20 years, Phil has been providing guidance with respect to Small Business Investment Companies and other Small Business Administrative regulations, federal and state banking laws and federal securities laws. 

Phil focuses on helping clients through the SBIC licensing process so that they may realize the benefits of the program and increase the amount of investment...

Sara C. Ainsworth Securities & Corporate Finance Attorney Polsinelli Washington, D.C.

As an associate in the Securities & Corporate Finance practice, clients rely on Sara Ainsworth to work with Polsinelli’s team of attorneys to analyze each transaction matter to develop a strategic approach to representation based on the client’s immediate and long-term business and operational goals.

Working closely with seasoned Polsinelli attorneys in the Securities & Corporate Finance practice, Sara helps deliver a range of legal services during the life cycle of the client’s business—from selecting the appropriate choice of entity through to exit strategy.  Her practice...