The SBA confirmed that franchisees are evaluated on an individual basis.
Note: This is an update to our previous Alert on this subject.
The SBA continues to clarify aspects of the Paycheck Protection Program. Effective on April 13, the SBA updated the original FAQs from April 3 to add question numbers 19 to 25. The new FAQs and answers cover the following principal areas:
The SBA provided a promissory note template. However, lenders may use their own form note, and may include any terms not inconsistent with the CARES Act and related SBA guidance.
Timing for Disbursements
Funds must be disbursed within 10 days after approval.
Measurement of Forgiveness Period
The forgiveness period lasts eight weeks and starts on the origination date of the loan.
Clarification on Affiliation Rule for Franchises
The SBA confirmed that franchisees are evaluated on an individual basis, and that franchisors cannot apply for the loan for their franchisees.
Clarification on Affiliation Rule for Hotels, Restaurants and Other NAICS Code 72 Applicants
The SBA did the following:
- Provided helpful examples of the application of the affiliation and employee count rules for these businesses (see FAQ 24).
- Confirmed that the 500-employee test for an applicant with multiple locations can be made on a per-physical-location basis, even if the total number of employees in all locations (including headquarters) exceeds 500.
- Confirmed that the affiliation rules are not applicable to any business with an NAICS code 72 as long as the applicant has 500 or fewer employees. This is very helpful for enterprises that are organized with a parent company and separate entities owning and operating each location, as each entity can file its own application. In addition, for businesses with an NAICS code 72 in a corporate structure that includes non-NAICS code 72 businesses, those non-NAICS code 72 entities are subject to the affiliation rules even though the NAICS code 72 entities are not.
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Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.
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If you have any questions about this Alert, please contact Nanette C. Heide, Sandra G. Stoneman, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.
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