{"id":5657,"date":"2020-04-13T00:00:00","date_gmt":"2020-04-13T00:00:00","guid":{"rendered":"http:\/\/www-staging.carta.com\/sg\/blog\/paycheck-protection-program-loans-ppp-carta\/"},"modified":"2021-03-05T06:55:32","modified_gmt":"2021-03-05T06:55:32","slug":"paycheck-protection-program-loans-ppp-carta","status":"publish","type":"post","link":"https:\/\/www-staging.carta.com\/sg\/blog\/paycheck-protection-program-loans-ppp-carta\/","title":{"rendered":"Paycheck Protection Program loans through Carta"},"content":{"rendered":"\r\n

Our ecosystem is dealing with a rapidly changing economic and social environment<\/a> stemming from COVID-19. Once growing businesses are now being forced to make radical adjustments to their 2020 targets.<\/p>\r\n\r\n\r\n\r\n

The recently passed CARES Act<\/a> provides relief to individuals and businesses that have been adversely impacted by the COVID-19 (coronavirus) pandemic. Among other things, the Act establishes and allocates $349 billion in funding to the Paycheck Protection Program (PPP). We at Carta believe that some impacted companies in our industry can benefit from this relief.\u00a0<\/p>\r\n\r\n\r\n\r\n

Paycheck Protection Program (PPP)<\/strong><\/h2>\r\n\r\n\r\n\r\n

The PPP seeks to support businesses with less than 500 employees through potentially forgivable loans up to $10 million for payroll, rent, and other covered costs. If the employer maintains its payroll, then portions of the loan used for payroll costs, interest on mortgage obligations, rent, and utilities may be forgiven. Payroll costs are capped at $100,000 a year for each employee, and it is anticipated that no more than 25% of the forgiven amount may be attributed to non-payroll costs. The PPP is being administered as a first-come, first-serve program and traditional lenders have been overwhelmed by interest, an opaque process, and technical difficulty in submitting applications to the Small Business Administration (SBA).<\/p>\r\n\r\n\r\n\r\n

Expanded eligibility<\/strong><\/h2>\r\n\r\n\r\n\r\n

The PPP was initially hindered by confusing standards that prevented many startups, small businesses with equity investors, and growth-stage companies from accessing the program. The constraint is the affiliation standard<\/em>, which typically requires the SBA to assess the employee base of the applicant as well as any of its affiliates when determining whether the applicant is eligible for loans under the PPP.<\/p>\r\n\r\n\r\n\r\n

The Treasury Department and the SBA have sought to address this constraint by releasing new guidance on the issue of affiliation<\/a>, namely through four tests to determine \u201ccontrol\u201d and the resulting affiliation trigger. These tests still leave some ambiguity around the affiliation standard and which businesses are eligible for the PPP. If any of the tests below apply to an individual or entity, then it may not be eligible for PPP loans:<\/p>\r\n\r\n\r\n\r\n