On Friday, April 3, 2020 the Small Business Administration (SBA) issued an interim rule on its affiliation rules to further implement the Payroll Protection Program (PPP) under the Coronavirus Aid, Relief and Economic Security Act (CARES Act). This rule becomes effective upon publication in the Federal Register.

Under existing law, the SBA may, under certain circumstances, factor in an applicant’s affiliated companies when determining whether a company qualifies as a “small business.” The SBA has a specific set of rules that explain when another person, business, or entity is considered an “affiliate” for size purposes. The CARES Act already waived the SBA’s affiliation rules for businesses in the restaurant and hospitality sectors for purposes of PPP eligibility. The new rule has no effect on these statutory waivers, which remain in full force and effect. The new rule, however, provides additional relief to faith-based organizations from the SBA’s affiliation rules.

The SBA confirmed in the rule that, in most cases, a borrower will be considered together with its affiliates for purposes of determining eligibility for the PPP. The rule exempts otherwise qualified faith-based organizations from the SBA’s affiliation rules where the application of the affiliation rules would substantially burden those organizations’ religious exercise.

The full Alert can be found here.