SECOND UPDATE: SBA Issues Interim Final Rules on Paycheck Protection Program Loan Eligibility and Use of Affiliation Rules to Determine Applicant’s Size - Treasury Offers Clarifications

Sep 19, 2026

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SECOND UPDATE explains the CARES Act framework for the Paycheck Protection Program (PPP) and addresses evolving guidance on eligibility. It summarizes the SBA interim final rules issued on April 2 and April 3, 2020 regarding loan eligibility and the use of existing affiliation rules to determine an applicant’s size, and notes Treasury FAQs issued April 6. The document clarifies covered loans, guarantor structure, the no-recourse principle when funds are used for approved purposes, and outlines who is eligible and how affiliation affects size determinations. It also highlights payroll cost considerations and borrower certification enforcement priorities.

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WHO IS ELIGIBLE?

Covered Period eligibility

Additional eligible categories

WHAT IS AFFILIATION?

Fact-specific determination

SBA affiliation rules for size

WHAT ARE THE PAYROLL COSTS?

Jacob W. Scott Partner Seattle Washington, D.C. Metro Area T: 202.735.2443 E: [jwscott@smithcurrie.com](jwscott@smithcurrie.com) SECOND UPDATE: SBA Issues Interim Final Rules on Paycheck Protection Program Loan Eligibility and Use of Affiliation Rules to Determine Applicant’s Size; Treasury Offers Clarifications CARES ACT (Coronavirus Aid, Relief and Economic Security Act) TITLE 1 – KEEPING AMERICAN WORKERS PAID AND EMPLOYED ACT PAYCHECK PROTECTION PROGRAM. (7(a)) On March 27, 2020, President Trump signed the CARES Act into law. As we previously stated on March 30, 2020, the Paycheck Protection Program (PPP) is one of the greatest potential benefits to Eligible Employers. It is designed to provide loans for payroll and overhead (interest on mortgage payments, rent, and utilities), for eligible businesses, and if it is used for payroll, interest on mortgage payments, rent, or utilities, the loan will be forgiven, if requirements are met. A copy of the application is here. Since that time, discussions and confusion over eligibility have transpired. On April 2, 2020, the Small Business Administration (SBA) issued Interim Final Rules on the PPP. On April 3, 2020, the SBA followed up with an Interim Final Rule on the use of existing affiliation rules to determine an applicant’s size for the purpose of PPP eligibility. On April 6, 2020, the U.S. Treasury issued guidance by way of the Treasury FAQs. Those items are incorporated herein. While loans are made by participating private banks, the SBA is a 100% participant for “covered loans” made under the PPP during the covered period (February 15, 2020 to June 30, 2020) , and the sole guarantor of the loans, under the same terms and conditions of a regular SBA Loan. There is no recourse against the borrower if the loan funds are used for approved purposes during an eightweek period after the loan is made. WHO IS ELIGIBLE? (i) During the Covered Period (February 15, 2020 to June 30, o Small business concerns; o Any business concern; o 501(c)(3) non-profit organization; o 501(c)(19) veterans organization, or o Tribal Business (sec 31(b)(2)(C) . which employ 500 or fewer employees, or if, more than 500 employees, meet the SBA size standard for the Industry that the concern operates 1 SBA’s Interim Final Rule focuses on the inclusion of small business concerns that fall under the Small Business Act. It also addresses the eligibility for a PPP loan of any other business with more than 500 employees through its applicable NAICS code. In short, a business does not have to qualify as a small business concern under the SBA’s rules to qualify for a PPP loan, as long as it employs 500 or fewer employees. Additionally eligible: (ii) A sole proprietorship or an independent contractor and eligible self-employed individual (see sec 7002(b) of the FFCRA2) may receive a covered loan, provided they submit documentation necessary to show eligibility, including payroll tax filings, Forms 1099-Misc, and income and expenses as required by the SBA. (iii) A business concern is eligible if it has more than one physical location, with 500 or fewer employees per physical location, and is part of the Accommodation and Food Services Sector (NAICS Code 72), which comprises establishments providing customers with lodging and/or preparing meals, snacks, and beverages for immediate consumption. (iv) Waiver of Affiliation for (1) NAICS Code 72; (2) Franchises; and (3) any business concern that receives assistance from a Small Business Investment Company, including qualified venture capitalists, See sec. 301 SBIC of 1958 (15 U.S.C. 681)3. (v) Employee – all individuals employed full-time, part-time or other basis. (vi) Affiliation – under 13 CFR 121.103 does apply to nonprofits and veteran organizations. WHAT IS AFFILIATION? A determination of affiliation is fact-specific, and not always clear-cut. However, other than 501(c)(3) and 501(c)(19) non-profit organi

FAQs

What guidance did the SBA and U.S. Treasury issue regarding PPP eligibility after the CARES Act was signed?

The SBA issued Interim Final Rules on April 2, 2020 covering PPP eligibility, followed by an Interim Final Rule on April 3, 2020 about using existing affiliation rules to determine applicant size. On April 6, 2020, the U.S. Treasury provided guidance through Treasury FAQs, which are incorporated in the document.

Who can receive a PPP loan during the covered period?

The document lists small business concerns and other business categories, including 501(c)(3) organizations, 501(c)(19) veterans organizations, and tribal businesses, as long as they meet employee thresholds or applicable SBA size standards. It also includes sole proprietorships, independent contractors, and eligible self-employed individuals if they provide required documentation.

How does “affiliation” affect whether an applicant qualifies for PPP loan eligibility?

Affiliation is described as a fact-specific determination based on whether affiliates have the ability to control one another, regardless of whether control is exercised. Evaluation commonly focuses on stock ownership, overlapping management, and identity of interest, and the PPP application requires disclosure of shared management and stock owners to help determine affiliation. The Treasury FAQs confirm SBA’s affiliation rules apply to all PPP applicants, with lenders permitted to rely on an applicant’s size certification.

Sep 19, 2026

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