Apple Growth Partners

SBA’s Newest PPP Interim Final Rule Clarifies Foreign Employees Must be Counted to Determine Size

Tuesday, May 19, 2020

SBA’s newest Interim Final Rule, posted on May 18th, clarifies that borrowers must count all employees, both foreign and domestic, for purposes of the size limitations of the PPP, subject to certain exceptions to affiliation. The IFR follows closely after the SBA and U.S. Department of Treasury published FAQ 44 on May 5, 2020, in its ongoing list of Frequently Asked Questions, which similarly provided that for purposes of the PPP’s 500 or fewer employee size standard, an applicant must count all of its employees and all of those of its affiliates, both U.S. and foreign.

FAQ #44 states that the SBA’s view was that all workers, both U.S. and foreign, need to be counted for the size standards, but left borrowers that had already applied for or received PPP funds questioning whether or not they were permitted to receive or keep the loans. FAQ #17 provided a previous safe harbor for borrowers that had relied on the original IFR published on April 2, 2020, but FAQ #44 did not. The newest IFR states that if the borrower applied for a PPP loan prior to May 5, 2020, the SBA will not find you to be ineligible based on your exclusion of non-U.S. employees if you (together with your affiliates to the extent required) had no more than 500 employees whose primary residence is in the United States.

The IFR also states that under no circumstances may PPP funds be used to support non-U.S. workers or operations.

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