As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

1 

PAYCHECK PROTECTION PROGRAM LOANS

Frequently Asked Questions (FAQs) 

The Small Business Administration (SBA), in consultation with the Department of the Treasury, 

intends to provide timely additional guidance to address borrower and lender questions 

concerning the implementation of the Paycheck Protection Program (PPP), including both First 

Draw PPP Loans and Second Draw PPP Loans. This document will be updated on a regular 

basis.

Borrowers and lenders may rely on the guidance provided in this document as SBA’s 

interpretation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (as 

amended), the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act 

(Economic Aid Act), and of the Paycheck Protection Program Interim Final Rules (“PPP Interim 

Final Rules”)(link). The U.S. government will not challenge lender PPP actions that conform to 

this guidance,1 and to the PPP Interim Final Rules and any subsequent rulemaking in effect at the 

time the lender’s action is taken. 

1. Question: Paragraph 3.b.iii of the first PPP Interim Final Rule, subsection C.3.c. of the 

consolidated interim final rule implementing updates to PPP, and subsection (h)(2)(i)(C) 

of the interim final rule for Second Draw PPP Loans state that lenders must “[c]onfirm

the dollar amount of average monthly payroll costs . . . for the preceding calendar year by 

reviewing the payroll documentation submitted with the borrower’s application.” Does 

that require the lender to replicate each of the borrower’s calculations?2

Answer: No. Providing an accurate calculation of payroll costs is the responsibility of 

the borrower, and the borrower attests to the accuracy of those calculations on the 

Borrower Application Form (SBA Form 2483 or SBA Form 2483-C for First Draw PPP 

Loans and SBA Form 2483-SD or SBA Form 2483-SD-C for Second Draw PPP Loans). 

Lenders are expected to perform a good faith review, in a reasonable time, of the 

borrower’s calculations and supporting documents concerning average monthly payroll 

cost. For example, minimal review of calculations based on a payroll report by a 

recognized third-party payroll processor would be reasonable. In addition, as the PPP 

Interim Final Rules indicate, lenders may rely on borrower representations, including 

with respect to amounts required to be excluded from payroll costs. 

1 This document does not carry the force and effect of law independent of the statutes and regulations on which it is 

based. 

2 Question 1 published April 3, 2020, revised March 3, 2021 to reflect the consolidated interim final rule 

implementing updates to the PPP, 86 FR 3692 (Jan. 14, 2021) and the interim final rule for Second Draw PPP 

Loans, 86 FR 3712 (Jan. 14, 2021), and revised again on March 12, 2021 to conform to subsection III.1.h. of the 

interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021. 
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

2

If the lender identifies errors in the borrower’s calculation or material lack of 

substantiation in the borrower’s supporting documents, the lender should work with the 

borrower to remedy the issue.

2. Question: Are small business concerns (as defined in section 3 of the Small Business 

Act, 15 U.S.C. 632) required to have 500 or fewer employees to be eligible borrowers for 

First Draw PPP Loans?3

Answer: No. Small business concerns can be eligible borrowers for First Draw PPP 

Loans even if they have more than 500 employees, as long as they satisfy the existing 

statutory and regulatory definition of a “small business concern” under section 3 of the 

Small Business Act, 15 U.S.C. 632. A business can qualify if it meets the SBA 

employee-based or revenue-based size standard corresponding to its primary industry. 

Go to www.sba.gov/size for the industry size standards. 

Additionally, a business can qualify for a First Draw PPP Loan as a small business 

concern if it met both tests in SBA’s “alternative size standard” as of March 27, 2020: (1)

maximum tangible net worth of the business is not more than $15 million; and (2) the 

average net income after Federal income taxes (excluding any carry-over losses) of the 

business for the two full fiscal years before the date of the application is not more than $5 

million.

A business that qualifies as a small business concern under section 3 of the Small 

Business Act, 15 U.S.C. 632, may truthfully attest to its eligibility for a First Draw PPP 

Loan on the Borrower Application Form, unless otherwise ineligible.

Notwithstanding the foregoing, housing cooperatives, eligible 501(c)(6) organizations, 

and eligible destination marketing organizations, are eligible for a First Draw PPP Loan 

only if they employ no more than 300 employees.

4

3. Question: Does my business have to qualify as a small business concern (as defined in 

section 3 of the Small Business Act, 15 U.S.C. 632) in order to receive a First Draw PPP

Loan?5

3 Question 2 published April 6, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule 

implementing updates to the PPP. This FAQ applies only to First Draw PPP Loans. Different eligibility 

requirements apply to Second Draw PPP Loans. See FAQ #63 and subsection (c) of the interim final rule for 

Second Draw PPP Loans. 

4 See subsections B.1.g.v., B.1.g.vii., and B.1.g.viii. of the consolidated interim final rule implementing updates to 

the PPP for additional information on the eligibility of housing cooperatives, destination marketing organizations, 

and section 501(c)(6) organizations. 5 Question 3 published April 6, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule 

implementing updates to the PPP. This FAQ applies only to First Draw PPP Loans. Different eligibility 

requirements apply to Second Draw PPP Loans. See FAQ #63 and subsection (c) of the interim final rule for 

Second Draw PPP Loans. 
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

3

Answer: No. In addition to small business concerns, a business is eligible for a First 

Draw PPP Loan if the business has 500 or fewer employees or the business meets the 

SBA employee-based or revenue-based size standard for the industry in which it operates 

(if applicable). Similarly, First Draw PPP Loans are also available for qualifying taxexempt nonprofit organizations described in section 501(c)(3) of the Internal Revenue 

Code (IRC), tax-exempt veterans organization described in section 501(c)(19) of the IRC, 

Tribal business concerns described in section 31(b)(2)(C) of the Small Business Act, and

eligible nonprofit news organizations6 that have 500 or fewer employees or meet the 

SBA employee-based size standards for the industry in which they operate. First Draw 

PPP Loans also are available for housing cooperatives, eligible section 501(c)(6) 

organizations, and eligible destination marketing organizations that employ not more than 

300 employees. 

4. Question: Are lenders required to make an independent determination regarding 

applicability of affiliation rules under 13 C.F.R. 121.301(f) to borrowers?7

 

Answer: No. It is the responsibility of the borrower to determine which entities (if any) 

are its affiliates and determine the employee headcount of the borrower and its affiliates. 

Lenders are permitted to rely on borrowers’ certifications.

5. Question: Are borrowers required to apply SBA’s affiliation rules under 13 C.F.R. 

121.301(f)?8 

Answer: Yes. Borrowers must apply the affiliation rules, including any applicable 

exceptions or affiliation waivers, set forth in SBA’s Interim Final Rule on Affiliation, 

Interim Final Rule on Treatment of Entities with Foreign Affiliates, the consolidated 

interim final rule implementing updates to the PPP, and the interim final rule for Second 

Draw PPP Loans. A borrower must certify on the applicable Borrower Application Form

that the borrower is eligible to receive a PPP loan. For a First Draw PPP Loan, that 

certification means that the borrower has no more than 500 employees, is a small 

business concern as defined in section 3 of the Small Business Act (15 U.S.C. 632) that

meets the applicable SBA employee-based or revenue-based size standard, or meets the 

tests in SBA’s alternative size standard, after applying the affiliation rules, if applicable. 

(Notwithstanding the foregoing, housing cooperatives, eligible 501(c)(6) organizations, 

and eligible destination marketing organizations, are eligible for a First Draw PPP Loan 

only if they employ no more than 300 employees.) For a Second Draw PPP Loan, that 

certification means the borrower has no more than 300 employees, after applying the 

6 See subsection B.1.g.vi. of the consolidated interim final rule implementing updates to the PPP and FAQ #56 for 

additional information on the eligibility of nonprofit news organizations. 7 Question 4 published April 6, 2020.

8 Question 5 published April 6, 2020 and revised March 3, 2021 to conform to subsections B.1.g.v., B.1.g.vii., and 

B.1.g.viii of the consolidated interim final rule implementing updates to the PPP and subsection (c) of the interim 

final rule on Second Draw PPP Loans.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

4

affiliation rules, if applicable, and the borrower meets the other eligibility requirements in 

subsection (c) of the interim final rule for Second Draw PPP Loans. SBA’s existing 

affiliation exclusions apply to the PPP, including, for example the exclusions under 13 

CFR 121.103(b)(2).

6. Question: The affiliation rule based on ownership (13 C.F.R. 121.301(f)(1)) states that 

SBA will deem a minority shareholder in a business to control the business if the 

shareholder has the right to prevent a quorum or otherwise block action by the board of 

directors or shareholders. If a minority shareholder irrevocably gives up those rights, is it 

still considered to be an affiliate of the business?9

Answer: No. If a minority shareholder in a business irrevocably waives or relinquishes 

any existing rights specified in 13 C.F.R. 121.301(f)(1), the minority shareholder would 

no longer be an affiliate of the business (assuming no other relationship that triggers the 

affiliation rules).

7. Question: Section 7(a)(36)(A)(viii)(II) of the Small Business Act excludes from the 

definition of payroll costs any employee compensation in excess of $100,000 on an

annualized basis, as prorated for the period during which the payments are made or the 

obligation to make the payments is incurred. Does that exclusion apply to all employee 

benefits of monetary value?10

Answer: No. The exclusion of compensation in excess of $100,000 on an annualized 

basis, as prorated for the period during which the payments are made or the obligation to 

make the payments is incurred, applies only to cash compensation, not to non-cash 

benefits, including:

• employer contributions to defined-benefit or defined-contribution retirement 

plans;

• payment for the provision of employee benefits consisting of group health care or 

group life, disability, vision, or dental insurance coverage, including insurance 

premiums; and

• payment of state and local taxes assessed on compensation of employees. 

8. Question: Do PPP loans cover paid sick leave?11

Answer: Yes. PPP loans cover payroll costs, including costs for employee vacation, 

parental, family, medical, and sick leave. However, the CARES Act excludes qualified 

sick and family leave wages for which a credit is allowed under sections 7001 and 7003 

9 Question 6 published April 6, 2020.

10 Question 7 published April 6, 2020 and revised March 3, 2021 to conform to subsection B.4.h.ii. of the 

consolidated interim final rule implementing updates to the PPP. 11 Question 8 published April 6, 2020.
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

5 

of the Families First Coronavirus Response Act (Public Law 116–127). Learn more 

about the Paid Sick Leave Refundable Credit here. 

9. Question: My small business is a seasonal business whose activity increases from April 

to June. Considering activity from that period would be a more accurate reflection of my 

business’s operations. However, my small business was not fully ramped up on February 

15, 2020. Am I still eligible?12 

Answer: In evaluating a borrower’s eligibility, a lender may consider a seasonal 

borrower to have been in operation on February 15, 2020 if the business was in operation 

for any 12-week period between February 15, 2019 and February 15, 2020. 

10.Question: What if an eligible borrower contracts with a third-party payer such as a 

payroll provider or a Professional Employer Organization (PEO) to process payroll and 

report payroll taxes?13

Answer: SBA recognizes that eligible borrowers that use PEOs or similar payroll 

providers are required under some state registration laws to report wage and other data on 

the Employer Identification Number (EIN) of the PEO or other payroll provider. In these 

cases, payroll documentation provided by the payroll provider that indicates the amount 

of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s 

employees will be considered acceptable PPP loan payroll documentation. Relevant 

information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 

Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly 

Federal Tax Return, should be used if it is available; otherwise, the eligible borrower 

should obtain a statement from the payroll provider documenting the amount of wages 

and payroll taxes. In addition, employees of the eligible borrower will not be considered 

employees of the eligible borrower’s payroll provider or PEO. 

11.Question: May lenders accept signatures from a single individual who is authorized to 

sign on behalf of the borrower?14

Answer: Yes. However, the borrower should bear in mind that, as the Borrower 

Application Forms indicate, only an authorized representative of the applicant seeking a 

loan may sign on behalf of the applicant. An individual’s signature as an “Authorized 

Representative of Applicant” is a representation to the lender and to the U.S. government 

that the signer is authorized to make the certifications, including with respect to the 

applicant and each owner of 20% or more of the applicant’s equity, contained in the 

12 Question 9 published April 6, 2020 and revised March 3, 2021 to conform to subsection B.1.e. of the consolidated 

interim final rule implementing updates to the PPP.

13 Question 10 published April 6, 2020. 14 Question 11 published April 6, 2020 and revised March 3, 2021 to clarify applicability to non-profits. 
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

6 

Borrower Application Form. Lenders may rely on that representation and accept a single 

individual’s signature on that basis. 

12.Question: I need to request a loan to support my small business operations in light of 

current economic uncertainty. However, I pleaded guilty to a felony crime a very long 

time ago. Am I still eligible for the PPP?15 

Answer: A business is ineligible due to an owner’s criminal history only if an owner of 

20 percent or more of the equity of the applicant: 

• is presently incarcerated or, for any felony, is presently subject to an indictment, 

criminal information, arraignment, or other means by which formal criminal 

charges are brought in any jurisdiction; or 

• has been convicted of, pleaded guilty or nolo contendere to, or commenced any 

form of parole or probation (including probation before judgment) for, a felony 

involving fraud, bribery, embezzlement, or a false statement in a loan application 

or an application for federal financial assistance within the last five years. 

13.Question: Are lenders permitted to use their own online portals and an electronic form 

that they create to collect the same information and certifications as in the Borrower 

Application Forms, in order to complete implementation of their online portals?16

Answer: Yes. Lenders may use their own online systems and a form they establish that 

asks for the same information (using the same language) as the Borrower Application

Forms. Lenders are still required to send the data to SBA using SBA’s interface. 

14.Question: What time period should borrowers use to determine their number of 

employees?17

Answer: Borrowers may use their average employment over the time period used to 

calculate their loan amount to determine their number of employees, for the purposes of 

applying an employee-based size standard. Alternatively, borrowers may elect to use 

SBA’s usual calculation: the average number of employees per pay period in the 12 

15 Question 12 published April 6, 2020, revised June 25, 2020, and revised again on March 12, 2021 to conform to 

subsection B.2.a.iii. of the consolidated interim final rule implementing updates to the PPP (86 FR 3692, 3698), as 

amended by subsection III.2 of the interim final rule on Revisions to Loan Amount Calculation and Eligibility 

posted March 3, 2021. 

16 Question 13 published April 6, 2020 and revised March 3, 2021 to include multiple Borrower Application Forms. 17 Question 14 published April 6, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule 

implementing updates to the PPP and the interim final rule for Second Draw PPP Loans and to make other changes. 

First, Question 14 has been revised to remove discussion of how to calculate a borrower’s maximum loan amount 

because that question has been addressed in greater detail in the documents “How to Calculate Maximum Loan 

Amounts for First Draw PPP Loans and What Documentation to Provide – by Business Type” (link) and “Second 

Draw Paycheck Protection Program (PPP) Loans: How to Calculate Revenue Reduction and Maximum Loan 

Amounts Including What Documentation to Provide” (link). Second, Question 14 has been revised to clarify how 

seasonal employers determine their number of employees. 
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

7

completed calendar months prior to the date of the loan application (or the average 

number of employees for each of the pay periods that the business has been operational, 

if it has not been operational for 12 months). 

Seasonal businesses must use the average number of employees per pay period during the 

12-calendar week period the borrower used to calculate its payroll costs.

15.Question: Should payments that an eligible borrower made to an independent contractor 

or sole proprietor be included in calculations of the eligible borrower’s payroll costs?18

Answer: No. Any amounts that an eligible borrower has paid to an independent 

contractor or sole proprietor should be excluded from the eligible business’s payroll 

costs, except for fishing boat owners as permitted by PPP interim final rules.

19 However, 

an independent contractor or sole proprietor will itself be eligible for a loan under the 

PPP, if it satisfies the applicable requirements.

16.Question: How should a borrower account for federal taxes when determining its 

payroll costs for purposes of the maximum loan amount, allowable uses of a PPP loan, 

and the amount of a loan that may be forgiven?20

Answer: Payroll costs are calculated on a gross basis without regard to (i.e., not 

including subtractions or additions based on) federal taxes imposed or withheld, such as 

the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and 

income taxes required to be withheld from employees. As a result, payroll costs are not 

reduced by taxes imposed on an employee and required to be withheld by the employer, 

but payroll costs do not include the employer’s share of payroll tax. For example, an 

employee who earned $4,000 per month in gross wages, from which $500 in federal taxes 

was withheld, would count as $4,000 in payroll costs. The employee would receive 

$3,500, and $500 would be paid to the federal government. However, the employer-side 

federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs 

under the statute.21

18 Question 15 published April 6, 2020 and revised March 3, 2021 to incorporate the exception for fishing boat 

owners. 19 See 85 FR 39066, subsection III.1. (June 30, 2020) and subsection B.4.i. of the consolidated interim final rule 

implementing updates to the PPP.

20 Question 16 published April 6, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule 

implementing updates to the PPP. 21 The definition of “payroll costs” in the CARES Act, 15 U.S.C. 636(a)(36)(A)(viii), excludes “taxes imposed or 

withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period,” defined as 

February 15, 2020, to June 30, 2020. As described above, the SBA interprets this statutory exclusion to mean that 

payroll costs are calculated on a gross basis, without subtracting federal taxes that are imposed on the employee or 

withheld from employee wages. Unlike employer-side payroll taxes, such employee-side taxes are ordinarily 

expressed as a reduction in employee take-home pay; their exclusion from the definition of payroll costs means 

payroll costs should not be reduced based on taxes imposed on the employee or withheld from employee wages. 
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

8

17.Question: I filed or approved a loan application based on the version of the PPP Interim 

Final Rules published at the time of the application. Do I need to take any action based 

on the updated guidance in these FAQs?22

Answer: No. Borrowers and lenders may rely on the laws, rules, and guidance available 

at the time of the relevant application. However, borrowers whose previously submitted 

loan applications have not yet been processed may revise their applications based on 

clarifications reflected in these FAQs.

18.Question: Are PPP loans for existing customers considered new accounts for FinCEN 

Rule CDD purposes? Are lenders required to collect, certify, or verify beneficial 

ownership information in accordance with the rule requirements for existing customers?23

Answer: If the PPP loan is being made to an existing customer and the necessary 

information was previously verified, you do not need to re-verify the information. 

Furthermore, if federally insured depository institutions and federally insured credit 

unions eligible to participate in the PPP program have not yet collected beneficial 

ownership information on existing customers, such institutions do not need to collect and 

verify beneficial ownership information for those customers applying for new PPP loans, 

unless otherwise indicated by the lender’s risk-based approach to BSA compliance.

19.Question: Do lenders have to use a promissory note provided by SBA or may they use 

their own?24

Answer: Lenders may use their own promissory note or an SBA form of promissory 

note.

20.Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll 

costs over the applicable forgiveness covered period. When does the applicable 

forgiveness covered period begin?25

This interpretation is consistent with the text of the statute and advances the legislative purpose of ensuring workers 

remain paid and employed. Further, because the reference period for determining a borrower’s maximum loan 

amount will entirely precede the period during which borrowers will be subject to the restrictions on allowable uses 

of the loans, for purposes of the determination of allowable uses of loans and the amount of loan forgiveness, this 

statutory exclusion will apply with respect to such taxes imposed or withheld at any time, not only during such 

period. 

22 Question 17 published April 6, 2020 and revised March 3, 2021 to reflect subsequent rulemaking. 23 Question 18 published April 6, 2020. See FAQs #54 and #55 regarding application of these requirements to 

Second Draw PPP Loans. 

24 Question 19 published April 8, 2020. 25 Question 20 published April 8, 2020 and revised June 25, 2020. This question was further revised on March 3, 

2021 to reflect the consolidated interim final rule implementing updates to the PPP. 
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

9

Answer: The CARES Act provided for an eight-week forgiveness covered period that 

starts on the date the lender makes a disbursement of the PPP loan to the borrower. The 

lender must disburse the loan no later than 10 calendar days from the date of loan 

approval. 

The Paycheck Protection Program Flexibility Act of 2020, which became law on June 5, 

2020, extended the covered period for loan forgiveness from eight weeks after the date of 

loan disbursement to 24 weeks after the date of loan disbursement, providing 

substantially greater flexibility for borrowers to qualify for loan forgiveness. The 24-

week period applies to all borrowers that received forgiveness prior to December 27,

2020, but borrowers that received an SBA loan number before June 5, 2020, have the 

option to use an eight-week period.

The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act

(Economic Aid Act), enacted on December 27, 2020, changed the definition of “loan 

forgiveness covered period” to the period beginning on the date the lender disburses the 

PPP loan and ending on any date selected by the borrower that occurs during the period 

(i) beginning on the date that is 8 weeks after the date of disbursement and (ii) ending on 

the date that is 24 weeks after the date of disbursement.

21.Question: Do lenders need a separate SBA Authorization document to issue PPP 

loans?26

Answer: No. A lender does not need a separate SBA Authorization for SBA to 

guarantee a PPP loan. However, lenders must have executed SBA Form 2484 (Lender’s 

Application - Paycheck Protection Program Loan Guaranty) or SBA Form 2484-SD 

(Lender’s Application - Second Draw Loan Guaranty)27 to issue PPP loans and receive a 

loan number for each originated PPP loan. Lenders may include in their promissory 

notes for PPP loans any terms and conditions, including relating to amortization and 

disclosure, that are not inconsistent with the CARES Act, the Economic Aid Act, the PPP 

Interim Final Rules and guidance, and SBA Form 2484 or SBA Form 2484-SD.

22.Question: I am a non-bank lender that meets all applicable criteria of the PPP Interim 

Final Rules. Will I be automatically enrolled as a PPP lender? What criteria will SBA 

and the Treasury Department use to assess whether to approve my application to 

participate as a PPP lender?28

26 Question 21 published April 13, 2020 and revised March 3, 2021 to conform to the interim final rule for Second 

Draw PPP Loans. 

27 This requirement is satisfied by a lender when the lender completes the process of submitting a loan through 

SBA’s electronic loan processing system; no transmission or retention of a physical copy of SBA Form 2484 or 

SBA 2484-SD is required. 28 Question 22 published April 13, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule 

implementing updates to the PPP.
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

10

Answer: We encourage lenders that are not currently 7(a) lenders to apply in order to 

increase the scope of PPP lending options and the speed with which PPP loans can be 

disbursed to help small businesses across America. We recognize that financial 

technology solutions can promote efficiency and financial inclusion in implementing the 

PPP. Applicants should submit SBA Form 3507 and the relevant attachments to 

NFRLApplicationForPPP@sba.gov. Submission of the SBA Form 3507 does not result 

in automatic enrollment in the PPP. SBA and the Treasury Department will evaluate 

each application from a non-bank or non-insured depository institution lender and 

determine whether the applicant has the necessary qualifications to process, close, 

disburse, and service PPP loans made with SBA’s guarantee. SBA may request 

additional information from the applicant before making a determination. 

23.Question: How do the $10 million cap (or $2 million cap for a Second Draw PPP Loan) 

and affiliation rules work for franchises?29

Answer: If a franchise brand is listed on the SBA Franchise Directory, each of its 

franchisees that meets the applicable size standard can apply for a PPP loan. (The 

franchisor does not apply on behalf of its franchisees.) The $10 million cap on First 

Draw PPP Loans (or $2 million cap for a Second Draw PPP Loan) is a limit per 

franchisee entity, and each franchisee is limited to one First Draw and one Second Draw 

PPP Loan. 

Franchise brands that have been denied listing on the Directory because of affiliation 

between franchisor and franchisee may request listing to receive PPP loans. SBA will 

not apply affiliation rules to a franchise brand requesting listing on the Directory to 

participate in the PPP, but SBA will confirm that the brand is otherwise eligible for 

listing on the Directory. 

24.Question: How do the $10 million cap (or $2 million cap for a Second Draw PPP Loan) 

and affiliation rules work for hotels and restaurants (and any business assigned a North 

American Industry Classification System (NAICS) code beginning with 72)?30 

Answer: 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 First Draw PPP Loan. For Second Draw PPP 

Loans, a business that is assigned a NAICS code beginning with 72 may have no more 

than 300 employees per physical location and other eligibility criteria must be met.31 

29 Question 23 was published April 13, 2020 and revised March 3, 2021 to reflect the interim final rule for Second 

Draw PPP Loans.

30 Question 24 was published April 13, 2020 and revised March 3, 2021 to reflect the interim final rule for Second 

Draw PPP Loans.

31 See subsection (c) of the interim final rule for Second Draw PPP Loans. 
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

11

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 (or 300 employees for a Second Draw PPP loan). 

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 (or 300 employees for a Second Draw PPP loan) is permitted to apply for a 

separate PPP loan provided it uses its unique EIN. 

The $10 million (or $2 million for a Second Draw PPP Loan) maximum loan amount 

limitation applies to each eligible business entity, because individual business entities 

cannot apply for more than one First Draw or Second Draw PPP 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 First Draw 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 First Draw 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 First Draw 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. 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 First Draw PPP Loan as a small business 

concern if it, together with Companies X and Y, meets SBA’s other applicable 

size standards, as explained in FAQ #2. 
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

12

25.Question: Does the information lenders are required to collect from PPP applicants 

regarding every owner who has a 20% or greater ownership stake in the applicant 

business (i.e., owner name, title, ownership %, TIN, and address) satisfy a lender’s 

obligation to collect beneficial ownership information (which has a 25% ownership 

threshold) under the Bank Secrecy Act?32

Answer: 

For lenders with existing customers: With respect to collecting beneficial ownership 

information for owners holding a 20% or greater ownership interest, if the PPP loan is 

being made to an existing customer and the lender previously verified the necessary 

information, the lender does not need to re-verify the information. Furthermore, if 

federally insured depository institutions and federally insured credit unions eligible to 

participate in the PPP program have not yet collected such beneficial ownership 

information on existing customers, such institutions do not need to collect and verify 

beneficial ownership information for those customers applying for new PPP loans, unless 

otherwise indicated by the lender’s risk-based approach to Bank Secrecy Act (BSA) 

compliance.

For lenders with new customers: For new customers, the lender’s collection of the 

following information from all natural persons with a 20% or greater ownership stake in 

the applicant business will be deemed to satisfy applicable BSA requirements and 

FinCEN regulations governing the collection of beneficial ownership information: owner 

name, title, ownership %, TIN, address, and date of birth. If any ownership interest of 

20% or greater in the applicant business belongs to a business or other legal entity, 

lenders will need to collect appropriate beneficial ownership information for that entity. 

If you have questions about requirements related to beneficial ownership, go to 

https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule. Decisions 

regarding further verification of beneficial ownership information collected from new 

customers should be made pursuant to the lender’s risk-based approach to BSA 

compliance. 

26.Question: SBA regulations require approval by SBA’s Standards of Conduct Committee 

(SCC) for SBA Assistance, other than disaster assistance, to an entity, if its sole 

proprietor, partner, officer, director, or stockholder with a 10 percent or more interest is: 

a current SBA employee; a Member of Congress; an appointed official or employee of 

the legislative or judicial branch; a member or employee of an SBA Advisory Council or 

SCORE volunteer; or a household member of any of the preceding individuals. Do these 

entities need the approval of the SCC in order to be eligible for a PPP loan?33

32 Question 25 published April 13, 2020. See FAQs #54 and #55 regarding application of these requirements to 

Second Draw PPP Loans. 

33 Question 26 published April 14, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule 

implementing updates to the PPP, the interim final rule for Second Draw PPP Loans, and the consolidated interim 

final rule on loan forgiveness requirements and loan review procedures as amended by Economic Aid Act, 86 FR 

8283 (Feb. 5, 2021) (“consolidated interim final rule on loan forgiveness and loan review procedures”). 
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

13

 

Answer: The SCC previously authorized a blanket approval for PPP loans to such 

entities so that further action by the SCC is not necessary in the PPP program. Under the 

Economic Aid Act, certain borrowers became ineligible and are prohibited from 

receiving a First Draw PPP Loan or Second Draw PPP Loan made after December 27, 

2020. If a controlling interest in the borrower (meaning 20 percent by vote or value of 

the outstanding amount of any class of equity interest) is held directly or indirectly by the 

President of the United States, the Vice President of the United States, the head of an 

Executive Department, or a Member of Congress, or the spouse of such person as 

determined under applicable common law, the borrower is ineligible for a First Draw PPP 

Loan and a Second Draw PPP Loan. In addition, for any First Draw PPP Loan made 

before December 27, 2020, if the President of the United States, Vice President of the 

United States, the head of an Executive department, or a Member of Congress, or the 

spouse of any such person as determined under applicable common law, directly or 

indirectly held a controlling interest in the borrower on the date the loan application was 

submitted to the PPP lender, the borrower is required to disclose such interests to SBA on 

SBA Form 3508D and submit the form to the PPP lender following submission of the 

borrower’s application for loan forgiveness, as specified in subsection 6.c. of the 

consolidated interim final rule on loan forgiveness requirements and loan review

procedures as amended by the Economic Aid Act. 

27.Question: SBA regulations require a written statement of no objection by the pertinent 

Department or military service before it provides any SBA Assistance, other than disaster 

loans, to an entity, if its sole proprietor, partner, officer, director, or stockholder with a 10 

percent or more interest, or if a household member of any of the preceding individuals, is 

an employee of another Government Department or Agency having a grade of at least 

GS-13 or its equivalent. Does this requirement apply to PPP loans?34

 

Answer: No. The SCC has determined that a written statement of no objection is not 

required from another Government Department or Agency for PPP loans. However, see 

FAQ #26 for information for a borrower with a controlling interest (meaning 20 percent 

by vote or value of the outstanding amount of any class of equity interest) that is held 

directly or indirectly by the head of an Executive Department or the spouse of such 

person as determined under applicable common law. 

28.Question: Is a lender permitted to submit a PPP loan application to SBA through SBA’s 

electronic loan processing system before the lender has fulfilled its responsibility to 

review the required borrower documentation and calculation of payroll costs, and for 

34 Question 27 published April 14, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule 

implementing updates to the PPP, the interim final rule for Second Draw PPP Loans, and the consolidated interim 

final rule on loan forgiveness and loan review procedures.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

14

Second Draw PPP Loans, review the required borrower documentation regarding revenue 

reduction?35

Answer: No. Before a lender submits a PPP loan through SBA’s electronic loan 

processing system, the lender must have collected the information and certifications 

contained in the Borrower Application Form (SBA Form 2483, SBA Form 2483-C, SBA 

Form 2483-SD, or SBA Form 2483-SD-C) and the lender must have fulfilled its 

obligations set forth in paragraphs 3.b.(i)-(iii) of the first PPP Interim Final Rule, 

subsection C.3. of the consolidated interim final rule implementing updates to the PPP, or

subsection (h)(2)(i) of the interim final rule for Second Draw PPP Loans, as 

applicable. Please refer to the Interim Final Rules and FAQ #1 for more information on 

the lender’s responsibility regarding confirmation of payroll costs, and the interim final 

rule for Second Draw PPP Loans for the lender’s responsibility regarding confirmation of 

revenue reduction. 

Lenders who made PPP loans prior to April 14, 2020 and did not understand that these 

steps are required before submission into E-Tran did not need to withdraw applications 

submitted to E-Tran before April 14, 2020, but must have fulfilled lender responsibilities 

with respect to those applications as soon as practicable and no later than loan closing.

29.Question: Can lenders use scanned copies of documents or E-signatures or E-consents 

permitted by the E-sign Act?36

Answer: Yes. All PPP lenders may accept scanned copies of signed loan applications, 

loan forgiveness applications, and documents containing the information and 

certifications required by SBA Forms 2483, 2483-C, 2483-SD, 2483-SD-C, 3508, 

3508EZ, 3508S, or 3508D, and the promissory note used for the PPP loan. Additionally, 

lenders may also accept any form of E-consent or E-signature that complies with the 

requirements of the Electronic Signatures in Global and National Commerce Act (P.L. 

106-229). 

If electronic signatures are not feasible, when obtaining a wet ink signature without inperson contact, lenders should take appropriate steps to ensure the proper party has 

executed the document. 

This guidance does not supersede signature requirements imposed by other applicable 

law, including by the lender’s primary federal regulator.

35 Question 28 published April 14, 2020, revised March 3, 2021 to conform to the consolidated interim final rule 

implementing updates to the PPP and the interim final rule for Second Draw PPP Loans, and revised again 

March 12, 2021 to conform to subsection III.1.h. of the interim final rule on Revisions to Loan Amount Calculation 

and Eligibility posted March 3, 2021.

36 Question 29 published April 15, 2020, revised March 3, 2021 to reflect the additional SBA forms for Second 

Draw PPP Loans and loan forgiveness and revised again on March 12, 2021 to conform to subsection III.1.h. of the 

interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

15

30.Question: Can a lender sell a PPP loan into the secondary market?37

Answer: Yes. A PPP loan may be sold into the secondary market at any time after the 

loan is fully disbursed. A secondary market sale of a PPP loan does not require SBA 

approval. A PPP loan sold into the secondary market is 100% SBA guaranteed. A PPP 

loan may be sold on the secondary market at a premium or a discount to par value.

31.Question: Do businesses owned by large companies with adequate sources of liquidity 

to support the business’s ongoing operations qualify for a PPP loan?38

Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all 

borrowers must assess their economic need for a PPP loan under the standard established 

by the CARES Act and the PPP regulations at the time of the loan application. Although 

the CARES Act suspends the ordinary requirement that borrowers must be unable to 

obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers 

still must certify in good faith that their PPP loan request is necessary. Specifically, 

before submitting a PPP application, all borrowers should review carefully the required 

certification that “[c]urrent economic uncertainty makes this loan request necessary to 

support the ongoing operations of the Applicant.” Borrowers must make this certification 

in good faith, taking into account their current business activity and their ability to access 

other sources of liquidity sufficient to support their ongoing operations in a manner that is 

not significantly detrimental to the business. For example, it is unlikely that a public 

company with substantial market value and access to capital markets will be able to make 

the required certification in good faith, and such a company should be prepared to 

demonstrate to SBA, upon request, the basis for its certification.

39

Lenders may rely on a borrower’s certification regarding the necessity of the loan 

request. Any borrower that applied for a PPP loan prior to the issuance of this guidance 

and repaid the loan in full by May 18, 2020 will be deemed by SBA to have made the 

required certification in good faith.

32.Question: Does the cost of a housing stipend or allowance provided to an employee as 

part of compensation count toward payroll costs?40

Answer: Yes. Payroll costs includes all cash compensation paid to employees, subject to 

the $100,000 annual compensation per employee limitation.

37 Question 30 published April 17, 2020. 38 Question 31 published April 23, 2020 and revised March 3, 2021 to reflect subsequent PPP guidance and the 

interim final rule implementing updates to the PPP and the interim final rule for Second Draw PPP Loans. 39 Section 342 of the Economic Aid Act prohibits public companies from receiving a PPP loan after December 27, 

2020.

40 Question 32 published April 24, 2020.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

16

33.Question: Is there existing guidance to help PPP applicants and lenders determine 

whether an individual employee’s principal place of residence is in the United States?41

Answer: PPP applicants and lenders may consider IRS regulations (26 CFR § 1.121-

1(b)(2)) when determining whether an individual employee’s principal place of residence 

is in the United States.

34.Question: Are agricultural producers, farmers, and ranchers eligible for PPP loans?42 

Answer: Yes. Agricultural producers, farmers, and ranchers are eligible for First Draw 

PPP loans if: (i) the business has 500 or fewer employees, or (ii) the business fits within 

the applicable revenue-based sized standard under 13 C.F.R. 121.201. 

Additionally, agricultural producers, farmers, and ranchers can qualify for First Draw 

PPP Loans as a small business concern if their business meets SBA’s “alternative size 

standard.” The “alternative size standard” is currently: (1) maximum net worth of the 

business is not more than $15 million, and (2) the average net income after Federal 

income taxes (excluding any carry-over losses) of the business for the two full fiscal 

years before the date of the application is not more than $5 million.

Agricultural producers, farmers and ranchers are eligible for a Second Draw PPP Loan if 

they have 300 or fewer employees and meet the other eligibility criteria in subsection (c) 

of the interim final rule for Second Draw PPP Loans. 

For all of these criteria, the applicant must include its affiliates in its calculations. See 

FAQ #5.

35.Question: Are agricultural and other forms of cooperatives eligible to receive PPP 

loans?43

Answer: As long as other PPP eligibility requirements are met, small agricultural 

cooperatives and other cooperatives may receive PPP loans. The Economic Aid Act 

added housing cooperatives (as defined in section 216(b) of the Internal Revenue

Code of 1986) that employ not more than 300 employees to the entities eligible for First 

Draw PPP Loans and Second Draw PPP Loans.

36.Question: To determine borrower eligibility under the 500-employee or other applicable 

threshold for First Draw PPP Loans, or the 300-employee threshold for Second Draw 

41 Question 33 published April 24, 2020. 42 Question 34 published April 24, 2020 and revised March 3, 2021 to conform to the interim final rule for Second 

Draw PPP Loans.

43 Question 35 published April 24, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule 

providing updates to the PPP and the interim final rule for Second Draw PPP Loans.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

17

PPP Loans established by the Economic Aid Act, must a borrower count all employees or 

only full-time equivalent employees?44

Answer: For purposes of loan eligibility, the CARES Act defines the term employee to 

include “individuals employed on a full-time, part-time, or other basis.” A borrower 

must therefore calculate the total number of employees, including part-time employees, 

when determining their employee headcount for purposes of the eligibility threshold. For 

example, if a borrower has 200 full-time employees and 50 part-time employees each 

working 10 hours per week, the borrower has a total of 250 employees.

By contrast, for purposes of loan forgiveness, the CARES Act uses the standard of “fulltime equivalent employees” to determine the extent to which the loan forgiveness amount 

will be reduced in the event of workforce reductions.

37.Question: Do businesses owned by private companies with adequate sources of liquidity 

to support the business’s ongoing operations qualify for a PPP loan?45

Answer: See response to FAQ #31. 

38.Question: Section 1102 of the CARES Act provides that PPP loans are available only to 

applicants that were “in operation on February 15, 2020.” Is a business that was in 

operation on February 15, 2020 but had a change in ownership after February 15, 2020 

eligible for a PPP loan?46

Answer: Yes. As long as the business was in operation on February 15, 2020, if it meets 

the other eligibility criteria, the business is eligible to apply for a PPP loan regardless of 

the change in ownership. In addition, where there is a change in ownership effectuated 

through a purchase of substantially all assets of a business that was in operation on 

February 15, the business acquiring the assets will be eligible to apply for a PPP loan 

even if the change in ownership results in the assignment of a new tax ID number and 

even if the acquiring business was not in operation until after February 15, 2020. If the 

acquiring business has maintained the operations of the pre-sale business, the acquiring 

business may rely on the historic payroll costs and headcount of the pre-sale business for 

the purposes of its PPP application, except where the pre-sale business had applied for 

and received a PPP loan. The Administrator, in consultation with the Secretary, has 

determined that the requirement that a business “was in operation on February 15, 2020” 

should be applied based on the economic realities of the business’s operations.

44 Question 36 published April 26, 2020 and revised March 3, 2021 to reflect the interim final rule for Second Draw 

PPP Loans.

45 Question 37 published April 28, 2020. 46 Question 38 published April 29, 2020.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

18

39.Question: Will SBA review individual PPP loan files?47

Answer: For a PPP loan of any size, SBA may undertake a review at any time, before or 

after SBA remits a forgiveness payment to the lender, in SBA’s discretion. For example, 

SBA may review a loan if the loan documentation submitted to SBA by the lender or any 

other information indicates that the borrower may be ineligible for a PPP loan, or may be 

ineligible to receive the loan amount or loan forgiveness amount claimed by the 

borrower. 

The outcome of SBA’s review of loan files will not affect SBA’s guarantee of any loan 

for which the lender complied with the lender obligations set forth in paragraphs 

III.3.b(i)-(iii) of the first PPP Interim Final Rule, subsection C.3. of the consolidated 

interim final rule implementing updates to the PPP, or subsection (h)(2)(i) of the interim 

final rule for Second Draw PPP Loans, as applicable, and further explained in FAQ #1.

40.Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of 

the CARES Act (codified as section 7A of the Small Business Act) and SBA’s 

implementing rules and guidance) be reduced if the borrower laid off an employee, 

offered to rehire the same employee, but the employee declined the offer?48

Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under 

Section 1106(d)(6) of the CARES Act (codified as section 7A(d)(6) of the Small 

Business Act) to prescribe regulations granting de minimis exemptions from the CARES 

Act’s limits on loan forgiveness, SBA and Treasury issued an interim final rule excluding 

laid-off employees whom the borrower offered to rehire (for the same salary/wages and 

same number of hours) from the CARES Act’s loan forgiveness reduction 

calculation.49 The interim final rule specifies that, to qualify for this exception, the 

borrower must have made a good faith, written offer of rehire, and the employee’s 

rejection of that offer must be documented by the borrower. Employees and employers 

should be aware that employees who reject offers of re-employment may forfeit 

eligibility for continued unemployment compensation.

47 Question 39 published April 29, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule 

implementing updates to the PPP, the interim final rule for Second Draw PPP Loans, and the consolidated interim 

final rule on loan forgiveness and loan review procedures, and revised again on July 29, 2021 due to the 

discontinuance of the use of the Loan Necessity Questionnaire (SBA Form 3509 or 3510) and updates to SBA’s loan 

review processes. All loans, including those of $2 million and over, will continue to be subject to the PPP program 

requirements.

.

48 Question 40 published May 3, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule 

providing updates to the PPP, the interim final rule on Second Draw PPP Loans, and the consolidated interim final 

rule on loan forgiveness and loan review procedures. 49 See 85 FR 33004, 33007 (June 1, 2020) and subsection IV.5.a. of the consolidated interim final rule on loan 

forgiveness and loan review procedures. 
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

19

41.Question: Can a seasonal employer that received a First Draw PPP Loan in 2020 and 

elected to use a 12-week period between May 1, 2019 and September 15, 2019 to 

calculate its maximum PPP loan amount under the interim final rule issued by Treasury 

on April 27, 2020, make all the required certifications on the Borrower Application 

Form?50 

Answer: Yes. The 2020 First Draw PPP Loan Borrower Application Form required 

applicants to certify that “The Applicant is eligible to receive a loan under the rules in 

effect at the time this application is submitted that have been issued by the Small 

Business Administration (SBA) implementing the Paycheck Protection Program.” On 

April 27, 2020, Treasury issued an interim final rule allowing seasonal borrowers to use 

an alternative base period for purposes of calculating the loan amount for which they are 

eligible under the PPP. For First Draw PPP Loans made before December 27, 2020, an 

applicant that was otherwise in compliance with applicable SBA requirements, and that 

complied with Treasury’s interim final rule on seasonal workers, will be deemed eligible 

for a PPP loan under SBA rules. Instead of following the instructions on page 3 of the 

Borrower Application Form (April 2, 2020 version) for the time period for calculating 

average monthly payroll for seasonal businesses, an applicant may have elected to use the 

time period in Treasury’s interim final rule on seasonal workers. 

42.Question: Do nonprofit hospitals exempt from taxation under section 115 of the Internal 

Revenue Code qualify as “nonprofit organizations” under section 1102 of the CARES 

Act?51

Answer: Section 1102 of the CARES Act defines the term “nonprofit organization” as 

“an organization that is described in section 501(c)(3) of the Internal Revenue Code of 

1986 and that is exempt from taxation under section 501(a) of such Code.” The 

Administrator, in consultation with the Secretary of the Treasury, understands that 

nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code 

are unique in that many such hospitals may meet the description set forth in section 

501(c)(3) of the Internal Revenue Code to qualify for tax exemption under section 501(a), 

but have not sought to be recognized by the IRS as such because they are otherwise fully 

tax-exempt under a different provision of the Internal Revenue Code. 

 

50 Question 41 published May 3, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule 

implementing updates to the PPP. This FAQ applies only to First Draw PPP Loans made before December 27, 

2020. Seasonal employers that receive a PPP loan in 2021 must calculate payroll costs using average monthly 

payroll for any 12-week period between February 15, 2019 and February 15, 2020. See “How to Calculate 

Maximum Loan Amounts for First Draw PPP Loans and What Documentation to Provide – by Business Type” 

(link) and “Second Draw Paycheck Protection Program (PPP) Loans: How to Calculate Revenue Reduction and 

Maximum Loan Amounts Including What Documentation to Provide” (link). 51 Question 42 published May 3, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule 

implementing updates to the PPP.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

20

Accordingly, the Administrator will treat a nonprofit hospital exempt from taxation under 

section 115 of the Internal Revenue Code as meeting the definition of “nonprofit 

organization” under section 1102 of the CARES Act if the hospital reasonably

determines, in a written record maintained by the hospital, that it is an organization

described in section 501(c)(3) of the Internal Revenue Code and is therefore within a 

category of organization that is exempt from taxation under section 501(a).52 The 

hospital’s certification of eligibility on the Borrower Application Form cannot be made 

without this determination. This approach helps accomplish the statutory purpose of 

ensuring that a broad range of borrowers, including entities that are helping to lead the 

medical response to the ongoing pandemic, can benefit from the loans provided under the 

PPP.

This guidance is solely for purposes of qualification as a “nonprofit organization” under 

section 1102 of the CARES Act and related purposes of the CARES Act and does not

have any consequences for federal tax law purposes. Nonprofit hospitals should also 

review all other applicable eligibility criteria, including an important limitation on 

ownership by state or local governments.53

43.Question: FAQ #31 reminded borrowers to review carefully the required certification on 

the Borrower Application Form that “[c]urrent economic uncertainty makes this loan 

request necessary to support the ongoing operations of the Applicant.” SBA guidance 

and regulations provide that any borrower who applied for a PPP loan prior to April 24, 

2020 and repaid the loan in full by May 7, 2020 will be deemed by SBA to have made the 

required certification in good faith. Is it possible for a borrower to obtain an extension of 

the May 7, 2020 repayment date?54

Answer: SBA extended the repayment date for this safe harbor to May 14, 2020, and 

subsequently extended it again to May 18, 2020. See FAQ #47. Borrowers did not need 

to apply for the extensions. The extensions were implemented through revisions to the 

SBA’s interim final rule providing the safe harbor. See FAQ #46 for additional guidance 

on how SBA will review the certification.

52 This determination need not account for the ancillary conditions set forth in section 501(r) of the Internal Revenue 

Code and elsewhere associated with securing the tax exemption under that section. Section 501(r) states that a 

hospital organization shall not be treated as described in section 501(c)(3) unless it meets certain community health 

and other requirements. However, section 1102 of the CARES Act defines the term “nonprofit organization” solely 

by reference to section 501(c)(3), and section 501(r) does not amend section 501(c)(3). Therefore, for purposes of 

the PPP, the requirements of section 501(r) do not apply to the determination of whether an organization is 

“described in section 501(c)(3).”

53 See 85 FR 23450, 23451 (April 28, 2020) and the consolidated interim final rule implementing updates to the 

PPP.

54 Question 43 published May 5, 2020 and revised March 3, 2021 to reflect subsequent SBA interim final rules at 85 

FR 29845 (May 19, 2020) and 85 FR 31357 (May 26, 2020). 
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

21

44.Question: How do SBA’s affiliation rules at 13 C.F.R. 121.301(f) apply with regard to 

counting the employees of foreign and U.S. affiliates?55 

Answer: For purposes of the PPP’s 500 or fewer employee size standard (or 300 

employee size standard for Second Draw PPP Loans and certain entities for First Draw 

PPP Loans), an applicant must count all of its employees and the employees of its U.S 

and foreign affiliates, absent a waiver of or an exception to the affiliation rules. 13 

C.F.R. 121.301(f)(6). Business concerns seeking to qualify for a First Draw PPP Loan as 

a “small business concern” under section 3 of the Small Business Act (15 U.S.C. 632) on 

the basis of the employee-based size standard must do the same.

45.Question: Is an employer that repays its PPP loan by the safe harbor deadline (May 18, 

2020) eligible for the Employee Retention Credit?56

Answer: This question is no longer applicable because, as a result of a change in the law 

in December 2020, receipt of a PPP loan no longer makes an employer ineligible for the 

Employee Retention Credit. See FAQ #65 for updated information related to the 

Employee Retention Credit.

46.[RESERVED]57

47.Question: An SBA interim final rule posted on May 8, 2020 provided that any borrower 

who applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed 

by SBA to have made the required certification concerning the necessity of the loan 

request in good faith. Is it possible for a borrower to obtain an extension of the May 14, 

2020 repayment date?58

Answer: Yes, SBA extended the repayment date for this safe harbor to May 18, 2020, to 

give borrowers an opportunity to review and consider FAQ #46. Borrowers did not need 

to apply for this extension. This extension was implemented through a revision to the 

SBA’s interim final rule providing the safe harbor.

55 Question 44 published May 5, 2020 and revised March 3, 2021 to reflect the consolidated interim final rule 

implementing updates to the PPP and the interim final rule for Second Draw PPP Loans.

56 Question 45 published May 6, 2020 and revised May 27, 2020 to change the date from “(May 14, 2020)” to 

“(May 18, 2020).”

57 Question 46 published May 13, 2020, revised March 3, 2021 to reflect the interim final rule for Second Draw PPP 

Loans, and revised again on March 12, 2021 to reflect the interim final rule on Revisions to Loan Amount 

Calculation and Eligibility posted March 3, 2021, and deleted on July 29, 2021 due to the discontinuance of the use 

of the Loan Necessity Questionnaire (SBA Form 3509 or 3510).

58 Question 47 published May 13, 2020 and revised March 3, 2021 to reflect subsequent SBA interim final rules.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

22

48.Question: By when must a lender electronically submit an SBA Form 1502 indicating 

that PPP loan funds have been disbursed?59

Answer: SBA has made available a specific SBA Form 1502 reporting process through 

which PPP lenders report on PPP loans and collect the processing fee on fully disbursed 

loans to which they are entitled. Lenders must electronically upload SBA Form 1502 

information within 20 calendar days after a PPP loan is approved.

49.Question: What is the maturity date of a PPP loan?60

Answer: If a PPP loan received an SBA loan number on or after June 5, 2020, the loan 

has a five-year maturity. If a PPP loan received an SBA loan number before June 5, 

2020, the loan has a two-year maturity, unless the borrower and lender mutually agree to 

extend the term of the loan to five years. The promissory note for the PPP loan will state

the term of the loan.

50.Question: What effect does the payment or nonpayment of fees of an agent or other 

third party have on SBA’s guarantee of a PPP loan or SBA’s payment of fees to 

lenders?61

Answer: The payment or nonpayment of fees of an agent or other third party is not 

material to SBA’s guarantee of a PPP loan or to SBA’s payment of fees to lenders. 

Additional information about such fees can be found in subsection D.4 of the

consolidated interim final rule implementing updates to the Paycheck Protection 

Program. 

51.Question: Do payments required for the provision of group health care benefits, 

including insurance premiums, include vision and dental benefits?62

Answer: Yes. Section 308 of the Economic Aid Act specifies that payroll costs include 

employer contributions for group life, disability, vision, and dental insurance benefits.

52.Question: The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) 

extended the deferral period for borrower payments of principal, interest, and fees on all 

PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the 

lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of 

the borrower’s loan forgiveness covered period). Previously, the deferral period could 

59 Question 48 published May 19, 2020 and revised March 3, 2021 to conform to the consolidated interim final rule 

implementing updates to the PPP.

60 Question 49 published June 25, 2020. 61 Question 50 published August 11, 2020 and revised March 3, 2021 to conform to the consolidated interim final 

rule implementing updates to the PPP. 62 Question 51 published August 11, 2020 and revised March 3, 2021 to reflect subsection B.11.a.ii of the 

consolidated interim final rule implementing updates to the PPP.
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

23

end after 6 months. Are lenders and borrowers required to modify promissory notes used 

for PPP loans to reflect the extended deferral period?63

Answer: The extension of the deferral period under the Flexibility Act automatically 

applies to all PPP loans. Lenders are required to give immediate effect to the statutory 

extension and should notify borrowers of the change to the deferral period. SBA does not 

require a formal modification to the promissory note. A modification of a promissory 

note to reflect the required statutory deferral period under the Flexibility Act will have no 

effect on the SBA’s guarantee of a PPP loan.

53.[RESERVED]64

54.Question: Are FinCEN’s April 2020 Frequently Asked Questions regarding the 

Paycheck Protection Program (PPP) applicable to Second Draw PPP Loans?65 

Answer: Yes. The FinCEN April 2020 PPP Frequently Asked Questions (FAQs) apply 

to Second Draw PPP Loans. If you have general questions about requirements related to 

customer due diligence or beneficial ownership, please see 

https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule. 

55.Question: For purposes of Bank Secrecy Act/Anti-Money Laundering compliance, can a 

PPP lender rely on the same information received from a borrower for the purposes of a 

First Draw PPP Loan for a Second Draw PPP Loan to that same borrower?66

Answer: The information a lender obtained from a borrower in connection with a First 

Draw PPP Loan can be relied upon by that lender for a Second Draw PPP Loan 

application, if the borrower is an existing customer. Decisions regarding the updating of 

customer due diligence and the verification and updating of the beneficial ownership 

information collected from customers should be made consistent with the guidance for 

both existing customers and new customers set forth in the previous April 2020 FAQs 

and in this FAQ, and pursuant to the lender’s risk-based approach to Bank Secrecy Act 

compliance. 

56.Question: How does the 500-employee limit for First Draw PPP Loans and the 300-

employee limit for Second Draw PPP Loans apply to a public broadcasting station if a 

college or university operates or holds the license for the station and the station is not a 

separate legal entity?67

63 Question 52 published October 7, 2020. 64 Question 53 published December 9, 2020 and revised March 3, 2021 and deleted on July 29, 2021 due to the 

discontinuance of the use of the Loan Necessity Questionnaire (SBA Form 3509 or 3510). 65 Question 54 published January 29, 2021. 66 Question 55 published January 29, 2021. 67 Question 56 published January 29, 2021.
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

24

Answer: Subsection B.1.g.vi of the consolidated interim final rule implementing updates 

to the PPP, 86 FR 3692 (Jan. 14, 2021), and subsection (c)(4) of the interim final rule for 

Second Draw PPP Loans, 86 FR 3712 (Jan. 14. 2021), apply the 500- and 300-employee 

limits, respectively, based on the number of employees “per location” of the public 

broadcasting station. This limit on the number of employees per location applies to the 

public broadcasting station itself and does not include other employees of a college or 

university that operates or holds the license for the station. 

57.Question: When determining the eligibility of section 501(c)(6) organizations and 

destination marketing organizations for First Draw PPP Loans and Second Draw PPP 

Loans, how is “lobbying activities” defined?68 

Answer: For purposes of determining the eligibility of section 501(c)(6) organizations 

and destination marketing organizations for First Draw and Second Draw PPP Loans, 

“lobbying activities” is defined in section 3 of the Lobbying Disclosure Act of 1995 (2 

U.S.C. 1602). 

58.Question: May First Draw PPP Loan or Second Draw PPP Loan proceeds be used for 

lobbying activities or expenditures? 

Answer: No. None of the proceeds of a First Draw PPP Loan or Second Draw PPP 

Loan may be used for (1) lobbying activities, as defined in section 3 of the Lobbying 

Disclosure Act of 1995 (2 U.S.C. 1602); (2) lobbying expenditures related to a State or 

local election; or (3) expenditures designed to influence the enactment of legislation, 

appropriations, regulation, administrative action, or Executive order proposed or pending 

before Congress or any State government, State legislature, or local legislature or 

legislative body. 

59.Question: If a borrower that was eligible for a First Draw PPP Loan files for bankruptcy 

protection after disbursement of the First Draw PPP Loan, is that borrower eligible for 

loan forgiveness of its First Draw PPP Loan? 

Answer: Yes. If a borrower that was eligible for a First Draw PPP Loan files for 

bankruptcy protection after disbursement of the First Draw PPP Loan, that borrower is

eligible for loan forgiveness, provided it meets all requirements for loan forgiveness set 

forth in the PPP Interim Final Rules, including but not limited to, loan proceeds are used 

only for eligible expenses and at least 60% of the loan proceeds is used for eligible 

payroll costs. 

68 Questions 57-65 published March 3, 2021.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

25

60.Question: If a borrower that was eligible for a First Draw PPP Loan files for bankruptcy 

protection after disbursement of the First Draw PPP Loan, is that borrower eligible to 

apply for a Second Draw PPP Loan?69

Answer: No. Each applicant for a Second Draw PPP Loan must certify on the Second 

Draw Borrower Application Form (SBA Form 2483-SD or SBA Form 2483-SD-C) that 

the applicant and any owner of 20% or more of the applicant is not presently involved in 

a bankruptcy proceeding. Thus, a borrower that received a First Draw PPP Loan and 

files for bankruptcy protection after disbursement of the First Draw PPP Loan is not 

eligible to apply for a Second Draw PPP Loan. 

61.Question: To be eligible for a Second Draw PPP Loan, a borrower must certify on SBA 

Form 2483-SD or SBA Form 2483-SD-C that, before the Second Draw PPP Loan is 

disbursed, the borrower will have used the full loan amount (including any increase) of 

its First Draw PPP Loan “only for eligible expenses.” How does the separate

requirement that the borrower must use at least 60% of the First Draw PPP Loan 

proceeds for payroll costs affect this certification?70

Answer: The borrower may certify, for purposes of the Second Draw PPP Loan 

application, that it will have used all of its First Draw PPP Loan proceeds “only for 

eligible expenses” if the borrower has used or will use the First Draw PPP Loan proceeds 

for any or all of the eligible expenses outlined in subsection B.11.a.i.-xi of the 

consolidated interim final rule implementing updates to the PPP. Borrowers should be 

mindful that failure to use PPP loan proceeds for the required percentage of payroll costs 

will affect loan forgiveness. 

62.Question: If a borrower received partial forgiveness of its First Draw PPP Loan, does 

this make the borrower ineligible for a Second Draw PPP Loan?

Answer: If a borrower received partial forgiveness of its First Draw PPP Loan, the 

borrower is eligible for a Second Draw PPP Loan as long as the borrower used the full 

amount of its First Draw PPP Loan only for eligible expenses outlined in subsection 

B.11.a.i.-xi of the consolidated interim final rule implementing updates to the PPP. 

63.Question: May applicants use SBA’s established size standards (either revenue-based or 

employee-based) or SBA’s alternative size standard to qualify for a Second Draw PPP 

Loan?

69 Question 60 published March 3, 2021 and revised on March 12, 2021 to conform to subsection III.1.h. of the 

interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021. 70 Question 61 published March 3, 2021 and revised on March 12, 2021 to conform to subsection III.1.h. of the 

interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

26

Answer: No. Applicants may not use SBA’s established size standards (either revenuebased or employee-based) or the alternative size standard to qualify for a Second Draw 

PPP Loan. In general, the size eligibility requirement for Second Draw PPP Loans are 

narrower than the size eligibility requirement for First Draw PPP Loans. With some 

exceptions, an applicant is eligible for a Second Draw PPP Loan only if it, together with 

its affiliates (if applicable), employs no more than 300 employees. The only exceptions 

are if an Applicant: 

• Is assigned a NAICS code beginning with 72 and employs no more than 300 

employees per physical location, or 

• Is a news organization that is majority owned or controlled by a business concern 

that is assigned NAICS code 511110 or a NAICS code beginning with 5151 or is 

a nonprofit public broadcasting entity with a trade or business under NAICS code 

511110 or 5151, and, in either case, employs no more than 300 employees per 

physical location. 

64.Question: If an owner of an applicant, or a sole proprietor, self-employed individual, or 

independent contractor has an Individual Taxpayer Identification Number (ITIN) instead 

of a Social Security Number (SSN), can they use the ITIN on the Borrower Application 

Form for a PPP loan and the forms to apply for loan forgiveness?71

Answer: Yes. If an owner of an applicant, or a sole proprietor, self-employed 

individual, or independent contractor has an ITIN instead of an SSN, they may use the 

ITIN on the PPP Borrower Application Form (SBA Forms 2483, 2483-C, 2483-SD, and 

2483-SD-C, or lender’s equivalent) and the PPP Loan Forgiveness Application Forms 

(SBA Forms 3508, 3508EZ, and 3508S, or lender’s equivalent). An ITIN is a tax 

processing number only available to certain nonresident and resident aliens, their 

spouses, and dependents who cannot get an SSN. It is a 9-digit number, beginning with 

the number “9”, formatted like an SSN (NNN-NN-NNNN). To be eligible for a PPP loan 

or to receive loan forgiveness, the applicant must meet all eligibility criteria and PPP 

requirements, which includes the requirement that the principal place of residence for a 

sole proprietor, self-employed individual, or independent contractor must be in the 

United States.

65.Question: As of December 27, 2020, is an employer that receives a First Draw PPP 

Loan or Second Draw PPP Loan also eligible for the Employee Retention Credit? 

Answer: The Taxpayer Certainty and Disaster Tax Relief Act of 2020, which was 

enacted as Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-

260, 134 Stat. 1182, on December 27, 2020, permits an employer that received a First 

Draw PPP Loan or Second Draw PPP Loan to claim the Employee Retention Credit if the 

71 Question 64 published March 3, 2021 and revised on March 12, 2021 to conform to subsection III.1.h. of the 

interim final rule on Revisions to Loan Amount Calculation and Eligibility posted March 3, 2021.
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

27

employer is otherwise an eligible employer satisfying the requirements for the 

credit. However, payroll costs that are qualified wages for the Employee Retention 

Credit are not eligible for loan forgiveness if the employer elects to claim the credit for 

those amounts. (Additional guidance from the IRS is available at 

https://www.irs.gov/pub/irs-drop/n-21-20.pdf.)

66.Question: On March 3, 2021, SBA posted Interim Final Rule “Revisions to Loan 

Amount Calculation and Eligibility” allowing Schedule C filers to use gross income to 

calculate PPP loan amounts. What options do lenders have to assist Schedule C filers 

who already submitted a PPP loan application to use gross income to calculate their PPP 

loan amount?72

Answer: The options available to lenders depend on the status of the PPP loan 

application. 

• If the lender has not submitted a loan guaranty application for the Schedule C 

applicant who wishes to use gross income to calculate their loan amount, the 

applicant must submit to the lender SBA Form 2483-C for a First Draw PPP Loan 

or SBA Form 2483-SD-C for a Second Draw PPP Loan, and the lender then must 

submit a loan guaranty application to SBA through the Paycheck Protection 

Platform (Platform) using SBA Form 2484 (Revised 3/21) for a First Draw PPP 

Loan or SBA Form 2484-SD (Revised 3/21) for a Second Draw PPP Loan. 

• If the lender has submitted a loan guaranty application to the Platform and the 

loan guaranty application has not yet been approved, the lender may withdraw the 

loan guaranty application from the Platform and resubmit a loan guaranty 

application after receipt from the applicant of SBA Form 2483-C for a First Draw 

PPP Loan or SBA Form 2483-SD-C for a Second Draw PPP Loan. The lender 

must use SBA Form 2484 (Revised 3/21) for a First Draw PPP Loan or SBA 

Form 2484-SD (Revised 3/21) for a Second Draw PPP Loan when resubmitting 

the loan guaranty application. 

• If SBA has issued a loan number, but the loan has not yet been disbursed, the 

lender may cancel the loan in E-Tran Servicing and the applicant may apply for a 

new loan using SBA Form 2483-C for a First Draw PPP Loan or SBA Form 

2483-SD-C for a Second Draw PPP Loan. 

• If the lender has disbursed the loan but has not filed the related Form 1502 Report 

reporting disbursement of the loan, the applicant must repay the PPP loan in full, 

the lender must cancel the loan in E-Tran Servicing, and the applicant may apply 

for a new loan using SBA Form 2483-C for a First Draw PPP Loan or SBA Form 

2483-SD-C for a Second Draw PPP Loan. 

• If the lender has disbursed the loan and filed the related Form 1502 Report 

reporting disbursement of the loan, no changes can be made to the loan amount 

calculation. 

72 Question 66 published March 12, 2021. 
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

28

Note: Loans must be canceled in E-Tran Servicing (not in the Platform). The Platform 

may take up to 2 days to reflect the actions in E-Tran Servicing. Lender cannot enter a 

new loan guaranty application until the Platform recognizes the prior loan’s cancellation. 

67.Question: To be eligible for a PPP loan, each applicant must certify on the PPP 

borrower application that the applicant and any owner of 20% or more of the applicant 

are not “presently involved in any bankruptcy.” If an applicant or owner filed for 

bankruptcy protection in the past, when is an applicant or owner no longer considered to 

be “presently involved in any bankruptcy” for PPP loan eligibility purposes?73

Answer: If an applicant or owner has filed a Chapter 7 bankruptcy petition, the applicant 

or owner is considered to be “presently involved in any bankruptcy” for PPP eligibility 

purposes until the Bankruptcy Court has entered a discharge order in the case. If an 

applicant or owner has filed a Chapter 11, 12 or 13 bankruptcy petition, the applicant or 

owner is considered to be “presently involved in any bankruptcy” for PPP eligibility 

purposes until the Bankruptcy Court has entered an order confirming the plan in the case. 

Additionally, if the Bankruptcy Court has entered an order dismissing the case, regardless 

of the Chapter, the applicant or owner is no longer “presently involved in any 

bankruptcy.” The discharge order, the order confirming the plan or the order of dismissal, 

whichever is applicable, must be entered before the date of the PPP loan application. 

Notwithstanding the foregoing, if an applicant has permanently closed as a result of a 

bankruptcy filing, the applicant is ineligible for a PPP loan because the applicant is 

required to certify on the PPP borrower application that the applicant “has not 

permanently closed.” 

68. Question: Does a nonprofit organization qualify as a “nonprofit organization” under 

 section 7(a)(36)(A)(vii) of the Small Business Act (15 USC 636(a)(36)(A)(vii)) if:

• The nonprofit organization has received approval of an application for tax exemption 

from the Puerto Rico Departamento de Hacienda; but 

• has not applied for and received recognition from the Internal Revenue Service as an 

organization described in section 501(c)(3) of the Internal Revenue Code?74 

Answer: The Administrator will treat a nonprofit organization that meets the description 

set forth in section 501(c)(3) of the Internal Revenue Code and that has obtained approval 

of its application for tax exemption from the Puerto Rico Departamento de Hacienda as 

meeting the definition of “nonprofit organization” under section 7(a)(36)(A)(vii) of the 

Small Business Act (15 USC 636(a)(36)(A)(vii)) under the conditions described below. 

Section 7(a)(36)(A)(vii) of the Small Business Act (15 USC 636(a)(36)(A)(vii)) defines 

the term “nonprofit organization” as “an organization that is described in section 

73 Question 67 published April 6, 2021. 74 Question 68 published June 8, 2021.
As of June 13, 2023 

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021. 

29

501(c)(3) of the Internal Revenue Code of 1986 and that is exempt from taxation under 

section 501(a) of such Code.” To be described in section 501(c)(3) of the Internal 

Revenue Code, an organization must be organized and operated exclusively for exempt 

purposes set forth in section 501(c)(3). The exempt purposes set forth in section 

501(c)(3) are charitable, religious, educational, scientific, literary, testing for public 

safety, fostering national or international amateur sports competition, and preventing 

cruelty to children or animals. 

The Administrator understands that some nonprofit organizations in Puerto Rico that 

have applied for and received tax exempt status locally from the Puerto Rico 

Departamento de Hacienda may meet the description set forth in section 501(c)(3) of the 

Internal Revenue Code but may not have sought to be recognized by the Internal Revenue 

Service as exempt from taxation under section 501(a) of the Internal Revenue Code on 

such basis. Because these organizations may not otherwise be subject to U.S. federal 

income tax, for example, due to Puerto Rico being treated as a foreign jurisdiction for 

most U.S. federal income tax purposes, these organizations may not have sought 

exemption under section 501(a). 

In order to accomplish Congress’s intent of ensuring a broad range of borrowers may 

qualify for PPP loans, the Administrator will treat a nonprofit organization that has 

obtained approval of its application for tax exemption from the Puerto Rico 

Departamento de Hacienda as meeting the definition of “nonprofit organization” under 

section 7(a)(36)(A)(vii) of the Small Business Act (15 USC 636(a)(36)(A)(vii)) if the 

nonprofit organization reasonably determines, in a written record maintained by the 

nonprofit organization, that it would be an organization described in section 501(c)(3) of 

the Internal Revenue Code (without regard to the notification requirement in section 

508(a) of the Internal Revenue Code) and is therefore within a category of organizations 

that are eligible to be exempt from taxation under section 501(a), regardless of whether 

the nonprofit organization has applied for recognition from the Internal Revenue Service. 

For more information, please visit www.irs.gov/charities-non-profits/charitableorganizations/exemption-requirements-501c3-organizations. 

This guidance is solely for purposes of qualification as a “nonprofit organization” under 

section 7(a)(36)(A)(vii) of the Small Business Act (15 USC 636(a)(36)(A)(vii)) and 

related purposes of the CARES Act, and does not have any consequences for any federal 

tax purposes. Puerto Rico nonprofit organizations must also meet all other applicable 

eligibility criteria to receive a PPP loan and loan forgiveness. 
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

30

69. Question: Why is SBA discontinuing use of the Loan Necessity Questionnaire (SBA 

Form 3509 or 3510)?75

Answer: In October 2020, SBA issued two Loan Necessity Questionnaires (SBA Forms 

3509 and 3510) to facilitate the collection of supplemental information that would be 

used by SBA loan reviewers to evaluate the good faith certification made by PPP 

borrowers on their loan application that economic uncertainty made the loan request 

necessary to support ongoing operations. Each borrower, that together with its affiliates, 

received PPP loans with an original principal amount of $2 million or greater was 

required to complete the form. 

On October 26, 2020, SBA published a 30-day notice soliciting comments on the 

information collection that included the Loan Necessity Questionnaires (85 FR 67809). 

Additionally, on January 4, 2021, SBA published a 60-day notice soliciting comments on 

the information collection that included the Loan Necessity Questionnaires (86 FR 172). 

SBA received 61 comments from members of the public regarding the Loan Necessity 

Questionnaires, and the majority of the comments raised objections to the questionnaires.

Based on the results of loan reviews that it has completed thus far SBA believes audit 

resources will be more efficiently deployed across all loans if the loan necessity 

questionnaire is discontinued. The loan necessity reviews, including the review of the 

borrower’s completed Loan Necessity Questionnaire, are lengthy and have caused delays 

beyond the 90-day statutory timeline for forgiveness, thus negatively impacting those 

borrowers that made their loan necessity certification in good faith. For these reasons, 

SBA is discontinuing any reliance on the Loan Necessity Questionnaires.

70. Question: Are 501(c)(3) Nonprofit Lenders Eligible for PPP Loan Forgiveness?76

Answer: Yes, provided that the 501(c)(3) nonprofit lender has complied with all 

applicable PPP rules, other than 13 CFR 120.110(b) as incorporated into the PPP rules. 

Because the CARES Act provided that “[e]xcept as otherwise provided,” the SBA 

Administrator may guarantee PPP loans “under the same terms, conditions and 

processes” as other 7(a) loans, SBA initially interpreted the CARES Act to mean that 13 

CFR 120.110 was incorporated into the PPP requirements, except to the extent of any 

conflict with the statute. 13 CFR 120.110 provides in pertinent part that “non-profit 

businesses” and “financial businesses primarily engaged in the business of lending” are 

ineligible for SBA business loans. Although the CARES Act specifically authorized 

nonprofit organizations defined at 15 U.S.C. § 636(a)(36)(A)(vii) to be eligible for PPP 

75 Question 69 published July 29, 2021. 76 Question 70 published May 5, 2022.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

31

loans, it was silent as to financial businesses/lenders. SBA took this as allowing 

nonprofits to overcome the 13 CFR 120.110 restriction, but not lenders.

A review of SBA’s PPP loan records shows that 501(c)(3) nonprofit lenders were 

confused as to their eligibility for a PPP loan. 

SBA has determined that 501(c)(3) nonprofit lender borrowers reasonably relied on the 

CARES Act’s nonprofit authority regarding their eligibility for a PPP loan. In addition, 

enforcing the Forgiveness and Loan Review IFR (86 FR 8283) that provides for denial of 

forgiveness to 501(c)(3) nonprofit lenders due to application of the PPP eligibility rule 

incorporating 13 CFR 120.110(b) will negatively affect the remaining small number of 

501(c)(3) nonprofit lenders that have not yet received forgiveness.

Because of reasonable and demonstrated confusion on the part of 501(c)(3) nonprofit 

lender borrowers, significant borrower hardship, and interference with those borrowers’ 

mission of providing capital to underserved small businesses, the Administrator is 

exercising her broad discretion under Section 5(b)(7) of the Small Business Act (15 

U.S.C. 634(b)(7)) to decline to enforce the Forgiveness and Loan Review IFR rule 

providing for denial of forgiveness to ineligible borrowers for 501(c)(3) nonprofit 

lenders. As a result, 501(c)(3) nonprofit lenders are eligible for forgiveness of their PPP 

loans, provided that the 501(c)(3) nonprofit lender has complied with all applicable PPP 

rules, other than 13 CFR 120.110(b) as incorporated into the PPP rules.

71. Question:Are 501(c)(3) nonprofit organizations with more than 500 employees eligible for 

PPP Loan Forgiveness?77

Answer: Section 7(a)(36)(A)(vii) of the Small Business Act (15 U.S.C. 636(a)(36)(A)(vii)) (as 

added by section 1102(a)(2) of the CARES Act) defines the term “nonprofit organization” as “an

organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and that 

is exempt from taxation under section 501(a) of such Code” (501(c)(3) nonprofit organizations). 

In general, the CARES Act provided that 501(c)(3) nonprofit organizations with a total of 500 or 

fewer employees were eligible to receive a First Draw PPP Loan. The American Rescue Plan 

Act (ARPA), enacted on March 11, 2021, increased the size eligibility standard for 501(c)(3) 

nonprofit organizations for First Draw PPP Loans from a total of 500 or fewer employees to no 

more than 500 employees per physical location of the 501(c)(3) nonprofit organization. On 

March 22, 2021, SBA published an Interim Final Rule implementing the provisions of ARPA 

applicable to PPP (86 FR 15083) (ARPA IFR).

On May 31, 2022, the SBA Office of Hearings and Appeals (OHA) issued an Initial Decision in 

the Appeal of Lawndale Christian Health Center, Docket No. PPP-5819168004. In that Initial 

Decision, the Administrative Law Judge determined that because the applicability date set forth 

by SBA in the ARPA IFR stated that the ARPA changes to PPP apply to “loans approved, and 

loan forgiveness applications submitted, on or after March 11, 2021,” 501(c)(3) nonprofit 

77 Question 71 published July 8, 2022.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

32

organizations that received a First Draw PPP Loan before March 11, 2021, but applied for 

forgiveness on or after March 11, 2021, are entitled to forgiveness of their First Draw PPP Loan 

if they meet the ARPA increased size eligibility standard.

The Final Rule on Borrower Appeals of Final SBA Loan Review Decisions Under the Paycheck 

Protection Program published by SBA on September 16, 2021 (86 FR 51589) provides that 

initial decisions rendered by OHA are not precedential. The Administrator has reviewed the 

OHA decision issued in the Appeal of Lawndale Christian Health Center. Based on the OHA 

decision and the exercise of her broad discretion under Section 5(b)(7) of the Small Business Act 

(15 U.S.C. 634(b)(7)), the Administrator has determined that any 501(c)(3) nonprofit 

organization that received a loan before March 11, 2021, but submits a forgiveness application 

on or after March 11, 2021, will not be ineligible for forgiveness on the basis that they have more 

than 500 employees in multiple physical locations. As a result, a 501(c)(3) nonprofit 

organization that submits a forgiveness application on or after March 11, 2021, is eligible for 

forgiveness if the 501(c)(3) nonprofit organization meets the ARPA increased size eligibility 

standard and has otherwise complied with all applicable PPP rules.

72. Question: Are the amounts paid by a borrower to a third-party payer for the third-party 

payer’s employees to operate the borrower considered eligible payroll expenses for the purpose 

of calculating the maximum loan amount?78

Answer: On April 6, 2020, SBA published FAQ 10 which asked, “What if an eligible borrower 

contracts with a third-party payer such as a payroll provider or a Professional Employer 

Organization (PEO) to process payroll and report payroll taxes?” SBA’s answer to that FAQ 

addressed “PEOs or similar payroll providers” and stated, in part, that “payroll documentation 

provided by the payroll provider that indicates the amount of wages and payroll taxes reported to 

the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP 

loan payroll documentation.”

FAQ 10 was issued three days after the PPP program began accepting applications and was 

intended to provide guidance to PPP borrowers when calculating their maximum loan amount if 

the borrower contracted with a PEO or similar payroll provider to process payroll and report 

payroll taxes. FAQ 10 was intended to allow borrowers that contracted with a third-party payer

when paying employees to use the payroll amounts paid to the third-party payer as a basis for 

obtaining a PPP loan, resulting in the ability of the borrower to use the PPP loan to continue to 

pay payroll for those employees. Because there have been conflicting interpretations of FAQ 10, 

the Administrator has determined that a clarification of FAQ 10 is appropriate.

On September 13, 2022, the SBA Office of Hearings and Appeals (OHA) issued a decision in the 

Appeal of Windsor Court Hotel Partners, LLC, Docket No. PPP-5292997209, which addressed

FAQ 10. In that matter, the borrower (a hotel) and a management company contracted for 

borrower to use workers who were employed by the management company to operate the 

78 Question 72 published June 13, 2023.
As of June 13, 2023

These FAQs do not reflect changes made by the American Rescue Plan Act of 2021 enacted 

on March 11, 2021.

33

borrower. Borrower was responsible for the payroll costs associated with the management 

company employees. In the decision, the Administrative Law Judge, relying on FAQ 10, held 

that the management company is a “similar payroll provider” and that payroll costs of the similar 

payroll provider’s employees are includable as eligible payroll costs of the borrower for the

purpose of calculating the maximum loan amount. The decision found that the borrower 

ultimately incurred the payroll expense, and the management company did not apply for or 

receive a PPP loan. 

The Administrator has reviewed the OHA decision issued in the Appeal of Windsor Court Hotel 

Partners. Based on that decision and the exercise of the Administrator’s broad discretion under 

Section 5(b)(7) of the Small Business Act (15 U.S.C. 634(b)(7)), the Administrator is clarifying

FAQ 10. Accordingly, payroll costs paid by a borrower to a third-party payer for the thirdparty’s employees to operate the borrower are eligible payroll costs for the purpose of calculating 

the borrower’s maximum loan amount, as long as the employees were not otherwise counted 

towards payroll costs on a PPP loan received by the third-party payer. This clarification is 

consistent with the purpose of the PPP to cover payroll expenses and keep workers employed 

during the COVID pandemic. For example, some businesses, such as hotels, routinely structure 

their business operations to remit payroll costs to a management company that operates the 

business and provides workers. Other businesses lease employees or use staffing agencies to 

operate their business paying those entities’ employees to operate the business. In these 

situations, the borrower is ultimately responsible for the payroll expense. As a result, payroll 

cost documentation which shows that a borrower paid a third-party payer for the employees of 

the third-party to operate the borrower will be permitted to support eligible payroll costs for the 

purpose of calculating the maximum loan amount as long as the employees were not otherwise 

counted towards payroll costs on another PPP loan, and all other PPP requirements are met, 

including the submission of payroll documentation that indicates the amount of wages and 

payroll taxes reported to the IRS by the third-party payer.