The Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act allocated another $284 billion to the Paycheck Protection Program (PPP) but limited second draw PPP loans to businesses with 300 or fewer employees. Many businesses that were eligible for this relief under the 500-employee threshold in the CARES Act are now recalculating their headcounts to determine if they qualify under the new eligibility requirements.
The SBA determines number of employees in accordance with the CFR Section 121.106, which allows for all individuals employed on a full-time, part-time, or other basis to be included in the count, including employees obtained from a temporary employee agency, professional employee organization or leasing concern. The Code reads:
(1) The average number of employees of the concern is used (including the employees of its domestic and foreign affiliates) based upon numbers of employees for each of the pay periods for the preceding completed 12 calendar months.
(2) Part-time and temporary employees are counted the same as full-time employees.
(3) If a concern has not been in business for 12 months, the average number of employees is used for each of the pay periods during which it has been in business.
(4)(i) The average number of employees of a business concern with affiliates is calculated by adding the average number of employees of the business concern with the average number of employees of each affiliate. If a concern has acquired an affiliate or been acquired as an affiliate during the applicable period of measurement or before the date on which it self-certified as small, the employees counted in determining size status include the employees of the acquired or acquiring concern. Furthermore, this aggregation applies for the entire period of measurement, not just the period after the affiliation arose.
(ii) The employees of a former affiliate are not counted if affiliation ceased before the date used for determining size. This exclusion of employees of a former affiliate applies during the entire period of measurement, rather than only for the period after which affiliation ceased. However, if a concern has sold a segregable division to another business concern during the applicable period of measurement or before the date on which it self-certified as small, the employees used in determining size status will continue to include the employees of the division that was sold.
Please contact your Grassi advisor or our Crisis Response & Recovery hotline at 212.223.6216 or response@grassiadvisors.com for assistance with calculating your employee count and revenue decline and determining your eligibility for a PPP second draw loan.
