Can I Apply for Ppp With Multiple Banks
On December 22, 2022 Congress passed the new stimulus beak which includes new Paycheck Protection Plan loans and new EIDL grants along with other small business relief. Read more about that legislation and apply for a new PPP loan here .
Tin can you employ for COVID relief loans, such as EIDL or PPP loans, for more than than one business concern you own? It'southward a question many modest business organization owners who ain multiple businesses are asking these days, as the various businesses they ain or invest in have suffered financially.
The short answer is that owning multiple small-scale businesses doesn't in and of itself terminate you from applying for either of these loans for multiple businesses. Only those business relationships could impact whether those businesses authorize.
First let's chop-chop review the 2 main COVID relief loan programs currently available to small businesses:
- Paycheck Protection Programme (PPP) loans. These provide upwards to 2.v times average monthly payroll. Businesses that utilise the proceeds from one of these loans for payroll, rent or mortgage interest and/or utilities can utilize to accept part or all of the loan forgiven. (Read our CARES Act FAQs for more details on how PPP loans work.)
- Economical Injury Disaster Loans (EIDLs). These are low-interest working uppercase loans for up to $2 one thousand thousand that can be used toward payroll besides as other expenses. They come up with an advance (or "grant") of upwards to $x,000 that does take to be repaid. (Read our EIDL FAQs for more data most these loans.)
This is a technical subject and our goal is to alert you to some of the issues involved. It is not intended to provide legal or financial advice. Be certain to discuss this topic with your attorney, financial advisor or accounting professional to determine how it applies to your business.
The Big Question: Are Y'all a Small-scale Business?
SBA loans are designed to aid pocket-size businesses. So the very get-go affair a small concern needs to consider when applying for 1 of these loans is whether information technology is considered a small business concern by the SBA.
To decide this, the SBA normally applies "size standards" which can be based on number of employees or, in some cases almanac receipts for a specific industry. In addition, in the example of PPP and EIDL loans, there are other specific requirements that come up into play.
PPP Size Standards
PPP loans autumn under the popular 7(a) loan program and usually we'd turn to the requirements of that programme to determine what businesses qualify as a small business organization. Only in the CARES Act, Congress made some adjustments to brand these loans available to businesses that normally wouldn't qualify.
To qualify for SBA funding nether the PPP programme, yous must be a small concern every bit defined past the SBA. This includes:
- Small businesses or non-profit 501(c)(3) organizations with 500 or fewer employees
- Small-scale businesses, 501(c)(19) veteran's organizations or tribal concerns that meet the SBA size standards ( See SBA size standards here .)
- Sole proprietors or independent contractors
Most notably, the CARES Human activity relaxes affiliation standards for businesses in the food or hospitality industry (NAICS codes commencement in 72) every bit long as they don't take more than 500 employees per location. In addition, the normal affiliation rules are waived for franchises or businesses receiving financial assistance from a Small Concern Investment Visitor. (We'll get to affiliation standards in a moment.)
EIDL Size Standards
EIDL loans as well carry requirements that businesses must meet in guild to apply. According to the COVID-19 EIDL application provided by the SBA:
- You lot must exist a pocket-size business, cooperative, ESOP or tribal business with 500 or fewer employees;
- An individual who operates as a sole proprietorship, with or without employees, or equally an independent contractor; or
- A private not-profit or small agronomical cooperative.
- A concern with more than than 500 employees that meets SBA size standards
Affiliated Businesses: Bigger Together?
With SBA loans generally, businesses that share mutual owners or fifty-fifty investors may be considered "affiliated" businesses and then SBA "affiliation standards" come up into play. A small concern may no longer qualify as a small business organization due to these affiliations. If you or your business concern partners or investors have multiple businesses, you lot'll want to familiarize yourself with these rules and become advice to determine if you still qualify.
The SBA explains size and affiliation principles that employ to small businesses in CFR §121.301 * . In part, it says a concern applying for most 7(a) loans (which PPP loans fall under) likewise as EIDL loans must satisfy two criteria:
(1) The size of the bidder alone ( without affiliates ) must not exceed the size standard designated for the industry in which the applicant is primarily engaged; and
(2) The size of the applicant combined with its affiliates must not exceed the size standard designated for either the chief manufacture of the bidder alone or the main industry of the applicant and its affiliates, whichever is higher. (accent added)
In other words, a business can't be also large to authorize, either on its ain or with affiliated businesses. (Keeping in mind, every bit mentioned earlier, that in that location are some exceptions for these programs.)
So what is an affiliate? The SBA explains that as well:
"Concerns and entities are affiliates of each other when one controls or has the power to command the other, or a 3rd party or parties controls or has the power to control both. Information technology does not matter whether control is exercised, so long every bit the power to control exists."
It goes on to lay out four principles that may apply:
- Amalgamation by ownership. This is generally where someone has the power to command more than 50% of the business concern's voting equity.
- Affiliation based on management. This may include " where the CEO or President of the applicant business organization (or other officers, managing members, or partners who control the direction of the concern) as well controls the management of one or more other concerns."
- Amalgamation based on identity of interest. This includes where "Individuals or firms that have identical or substantially identical business or economic interests (such equally close relatives, individuals or firms with mutual investments, or firms that are economically dependent through contractual or other relationships) may be treated as one party."
- Amalgamation arising nether stock options, convertible securities, and agreements to merge.
To put it in the most basic terms, determining whether your business is considered a pocket-sized business is not e'er as clear as counting the headcount for each of your individual businesses. Amalgamation betwixt multiple businesses may mean a business organisation that otherwise could qualify on its own no longer does, as the outcome of affiliation rules.
The SBA gives this example in the Economic Injury Disaster Loan standard operating procedures:
"Joe Smith owns 100% of a corporation named ABC, Inc. which operates a clothing store. ABC, Inc. practical for an EIDL equally a event of a 2014 disaster. Mr. Smith too owns a farm and reports income from his subcontract operation on Schedule F of his personal IRS Form 1040, Federal Income Tax Render.
"He reported gross revenue of $750,000 for the farm operation in 2013 which was the yr preceding the disaster. The gross acquirement for ABC, Inc. in 2013 was $240,000. As a result, the chief manufacture of the affiliated group is farming which is ineligible for EIDL aid. Farming is the primary industry considering the farm operation generated more gross revenue in the year preceding the disaster than the clothing store. This means neither the farm operation nor ABC, Inc. would be eligible to receive an EIDL."
EIDL & Affiliation Rules
When you lot fill out an EIDL application you lot'll demand to answer a question nearly whether your business is owned by another business entity. (For example, an LLC tin own another LLC. LLC owners are known as "members.") If you reply "yep," you volition be asked to provide information well-nigh that business applicant parent entity. If a business bidder is endemic by a business entity, that business organization entity must provide data as function of the application and must sign a guarantee. If you have multiple DBAs that operate nether one LLC, it's likely the LLC would utilize for the loan but be sure to consult with your taxation professional or a small-scale business counselor (run across resources below) to make up one's mind the all-time manner to utilize.
The awarding too so prompts all owners with at least 20% ownership to enter their information.
Be aware that while an owner with multiple businesses may apply for an EIDL, in that location may be boosted scrutiny to decide whether amalgamation rules use. Multiple EIDL loan applications received from the same applicant (and/or whatever related entities, affiliates, or business principals) for a unmarried disaster result are called "companion files." The loans themselves will generally be processed every bit dissever instance files, but the SBA does generally crave the same loan officer to process companion files when possible. In add-on, the SBA tin can consolidate applications from business concerns with identical ownership into a single case file.
Tip : Want assistance applying for an Economic Injury Disaster Loan? You can get free assist with the awarding from your Small-scale Business Development Center (SBDC), SCORE mentor, or Women'southward Business Center. You tin also telephone call the SBA Disaster Assistance hotline at 1-800-659-2955.
EIDL Maximum Loan Amounts
It's besides of import to sympathise that there is a limit of $2,000,000 on disaster business loans. According to the SBA, the limit applies to the total of all direct physical and economic injury disaster loans approved to whatsoever one borrower and its affiliates for any ane disaster. Withal, the SBA may exist able to waive that limit for a business organisation that is considered a "Major Source of Employment (MSE)" or in other specific circumstances. (You can learn more on page 106 of the Standard Operating Procedures for Disaster Loans .)
PPP Loans & Affiliation Rules
Nosotros mentioned earlier that the SBA has adjusted some qualifying standards for PPP loans, including relaxing affiliation rules for certain types of businesses.
Just the CARES Act doesn't waive all affiliation rules for PPP loans. In the SBA'due south Interim Final rule , it explains, "In most cases, a borrower will be considered together with its affiliates for purposes of determining eligibility for the PPP. Under SBA rules, entities may be considered affiliates based on factors including stock ownership, overlapping management, and identity of interest ."
The PPP application released by Treasury on Apr 2, 2022 requires borrowers to listing all owners with at least twenty% ownership. In a annotate on that awarding course in the Interim Final rule, the SBA then states: The information supplied by the applicant in response to that information request should exist used by applicants equally they assess whether they have affiliates that should be included in their number of employees reported on SBA Form 2483 ."
The application goes on to say, "All parties listed below are considered owners of the Applicant Business as defined in thirteen CFR § 120.10, as well as "principals."
- For a sole proprietorship, the sole proprietor;
- For a partnership, all general partners, and all limited partners owning twenty% or more of the equity of the firm;
- For a corporation, all owners of 20% or more of the corporation;
- For express liability companies, all members owning 20% or more of the company; and
- Any Trustor (if the Applicant is owned by a trust)."
As with EIDL, you must disembalm ownership in order to apply, and then the lender tin evaluate affiliates to determine whether a business qualifies. It's not but the number of employees in your business that qualifies yous for one of these loans; the number of employees in affiliated businesses may touch on qualification too.
PPP Maximum Loan Amounts
PPP loans fall under the SBA 7(a) loan programme. Normally the maximum loan amount under that program is $5 million. The SBA is very clear that "If affiliation exists, SBA's loan maximums apply to the bidder business, including all affiliates, equally if all were a single business organisation."
The CARES Act raises the maximum loan corporeality nether PPP to $x million. Only it likewise but explicitly waives amalgamation rules for certain types of businesses as mentioned to a higher place. For businesses for which the affiliation rules aren't waived, at that place is no specific guidance every bit to whether loan amounts for multiple businesses determined to exist affiliates would be capped at $10 one thousand thousand total.
Withal, based on reports of companies that received more than $x one thousand thousand through affiliated businesses, that does not seem to be a hurdle.
The Bottom Line
If you or whatsoever owners of your business organisation ain multiple businesses, make sure yous discuss these affiliation rules with your chaser, auditor or financial counselor to sympathize how they may touch your ability to qualify.
Resources :
SBA Final Acting Rule
The CARES Act
Standard Operating Procedures SOP 50 30 9
* The Lawmaking of Federal Regulations (CFR) annual edition is the codification of the full general and permanent rules published in the Federal Register by the departments and agencies of the Federal Government produced by the Role of the Federal Register (OFR) and the Government Publishing Office.)
A detailed and helpful discussion of affiliation rules can be found hither .
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