By Cary Zimmerman & Demetrius Robinson
Only one day after issuing a new Interim Final Rule (on June 11, 2020) to amend the very first Interim Final Rule issued by the Small Business Administration (SBA) pertaining to the Paycheck Protection Program (PPP), which was issued originally on April 2, 2020, the SBA issued yet another Interim Final Rule to make additional changes to the April 2, 2020 rule.
The June 12, 2020 Interim Final Rule addresses a single issue. The original rule disqualified an applicant from eligibility for a PPP loan if any owner of 20% or more of the applicant’s equity had been convicted of any felony within the last five years. That specific part of the rule has been amended to state that an applicant will be ineligible for a PPP loan if any 20% or greater owner of the applicant has been convicted of (1) a felony involving fraud, bribery, embezzlement or a false statement in a loan application or an application for federal financial assistance within the last five years or (2) any other felony within the last year.
Certain other elements of the rule pertaining to eligibility based on the criminal history of any 20% or greater equity owners remain unchanged. Specifically, these prohibit an applicant from being eligible for a PPP loan if an owner of 20% or more of the applicant’s equity is:
- Incarcerated, on probation, on parole; or
- Presently subject to an indictment, criminal information, arraignment or other means by which formal criminal charges are brought in any jurisdiction.
In addition, applicants will continue to be ineligible under the original rule if they:
- Are engaged in any activity that is illegal under federal, state or local law;
- Are a household employer (individuals who employ household employees such as nannies or housekeepers; or
- Any business owned or controlled by them or any of their owners have ever obtained a direct or guaranteed loan from SBA or any other federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.
We will continue to publish alerts regarding developments with regard to PPP loans and other financial relief programs for small businesses. In the meantime, please reach out to Cary Zimmerman at firstname.lastname@example.org or 216.736.7275 or Demetrius Robinson at email@example.com or 615.427.5749 with any questions you have about the Paycheck Protection Program or other financial relief programs.