In determining eligibility under the Paycheck Protection Program, the SBA will aggregate “affiliates” of the borrower. This post further explores what the SBA considers “affiliate” of the borrower, based on the latest guidance from the SBA as of April 9, 2010.
How does the SBA Define “Control” for Aggregation Purposes?
The SBA’s standard definition of “control” for affiliation and aggregation purposes is a facts-heavy analysis similar to a totality of the circumstances standard. The SBA generally goes as high up and across the ultimate ownership group and its controlled companies when it comes to the entity deemed to control for aggregation/ affiliation purposes.
Control is both affirmative and negative best understood through use of examples:
- For examples of affirmative control, see all of the tests below.
- For examples of negative control, see Example 3 of Test 1 below.
Four tests will generally apply for affiliation based on control for PPP Loans.
Test 1 – Affiliation based on ownership:
Example 1 – Equity control: The classic and easiest example to understand is equity control. If an entity controls a majority of the equity (50%+1) of another business (or multiple businesses), the SBA will aggregate all of the employees of those companies together under PPP.