Under the CARES Act, any single business entity that is assigned a
NAICS code beginning with 72 (including hotels and restaurants)
and that employs not more than 500 employees per physical location
is eligible to receive a PPP loan. In addition, SBA’s
affiliation rules (13 CFR 121.103 and 13 CFR 121.301) do not apply
to any business entity that is assigned a NAICS code beginning
with 72 and that employs not more than a total of 500 employees.
As a result, if each hotel or restaurant location owned by a
parent business is a separate legal business entity, each hotel or
restaurant location that employs not more than 500 employees is
permitted to apply for a separate PPP loan provided it uses its
unique EIN. The $10 million maximum loan amount limitation applies
to each eligible business entity, because individual business
entities cannot apply for more than one loan.
The following examples illustrate how these principles apply.
Example 1. Company X directly owns multiple restaurants and has no
affiliates. Company X may apply for a PPP loan if it employs 500
or fewer employees per location (including at its headquarters),
even if the total number of employees employed across all
locations is over 500.
Example 2. Company X wholly owns Company Y and Company Z (as a
result, Companies X, Y, and Z are all affiliates of one another).
Company Y and Company Z each own a single restaurant with 500 or
fewer employees. Company Y and Company Z can each apply for a
separate PPP loan, because each has 500 or fewer employees. The
affiliation rules do not apply, because Company Y and Company Z
each has 500 or fewer employees and is in the food services
business (with a NAICS code beginning with 72).
Example 3. Company X wholly owns Company Y and Company Z (as a
result, Companies X, Y, and Z are all affiliates of one another).
Company Y owns a restaurant with 400 employees. Company Z is a
construction company with 400 employees. Company Y is eligible for
a PPP loan because it has 500 or fewer employees. The affiliation
rules do not apply to Company Y, because it has 500 or fewer
employees and is in the food services business (with a NAICS code
beginning with 72). The waiver of the affiliation rules does not
apply to Company Z, because Company Z is in the construction
industry.
Example 3. Company X wholly owns Company Y and Company Z (as a
result, Companies X, Y, and Z are all affiliates of one another).
Company Y owns a restaurant with 400 employees. Under SBA’s
affiliation rules, 13 CFR 121.301(f)(1) and (3), Company Y and
Company Z are affiliates of one another because they are under the
common control of Company X, which wholly owns both companies.
This means that the size of Company Z is determined by adding its
employees to those of Companies X and Y. Therefore, Company Z is
deemed to have more than 500 employees, together with its
affiliates. However, Company Z may be eligible to receive a PPP
loan as a small business concern if it, together with Companies X
and Y, meets SBA’s other applicable size standards,”.