Lawyer’s note on the CARES Act and SBA Applications

Please see the interesting note on the CARES Act and SBA Applications, regarding Affiliations and Companies with over 500 employees, provided by Charles R. Bernardini, a lawyer from  Nixon Peabody, LLP, a law firm with whom we are acquainted.

When applying for SBA CARES loan there is potential problem for groups with more than 500 employees.

  • The CARES loan application form in no. 3 asks for affiliates.
  • Not on the form, but on another pre-existing rule, there is the definition of affiliates in a group in order to determine if the company is a “small business” of under 500 employees and, therefore, eligible for mortgages by the Small Business Administration.
  • The Trump administration has not yet clarified whether it will follow that rule of the past or not.

If so, the group including the affiliates would have to have fewer than 500 employees in order to qualify

  • Since the module does not require a certification of less than 500 employees for the group, customers can apply and wait for the administration to clarify

US private equity funds are lobbying to avoid this problem.