10 Million Cap Affiliation Rules – Hotel & Restaurants

How do the $10 million cap and affiliation rules work for hotels and restaurants?

Any single business entity (including hotels and restaurants) that is assigned an NAICS code beginning with 72 and employs no more than 500 employees per physical location is eligible to receive a PPP loan. Each hotel and or restaurant location which meets these requirements can apply for separate PPP loans if it uses its unique EIN.

Linked here and pasted below is the text from the official question and answer document published by the Department of the Treasury, which you should reference:https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

Below is the official question from Q24 as of May 14, 2020
24. Question: How do the $10 million cap and affiliation rules work for hotels and restaurants (and any business assigned a North American Industry Classification System (NAICS) code beginning with 72)?

Below is the official answer from Q24 as of May 14, 2020
Answer: Under the CARES Act, any single business entity that is assigned a NAICS
code beginning with 72 (including hotels and restaurants) and that employs not more than
500 employees per physical location is eligible to receive a PPP loan.In addition, SBA’s affiliation rules (13 CFR 121.103 and 13 CFR 121.301) do not apply
to any business entity that is assigned a NAICS code beginning with 72 and that employs
not more than a total of 500 employees. As a result, if each hotel or restaurant location
owned by a parent business is a separate legal business entity, each hotel or restaurant
location that employs not more than 500 employees is permitted to apply for a separate
PPP loan provided it uses its unique EIN.The $10 million maximum loan amount limitation applies to each eligible business entity,
because individual business entities cannot apply for more than one loan. The following
examples illustrate how these principles apply.Example 1. Company X directly owns multiple restaurants and has no affiliates.
• Company X may apply for a PPP loan if it employs 500 or fewer employees per
location (including at its headquarters), even if the total number of employees
employed across all locations is over 500.

Example 2. Company X wholly owns Company Y and Company Z (as a result,
Companies X, Y, and Z are all affiliates of one another). Company Y and Company Z
each own a single restaurant with 500 or fewer employees.
• Company Y and Company Z can each apply for a separate PPP loan, because
each has 500 or fewer employees. The affiliation rules do not apply, because
Company Y and Company Z each has 500 or fewer employees and is in the food
services business (with a NAICS code beginning with 72).

Example 3. Company X wholly owns Company Y and Company Z (as a result,
Companies X, Y, and Z are all affiliates of one another). Company Y owns a restaurant
with 400 employees. Company Z is a construction company with 400 employees.
• Company Y is eligible for a PPP loan because it has 500 or fewer employees.
The affiliation rules do not apply to Company Y, because it has 500 or fewer
employees and is in the food services business (with a NAICS code beginning
with 72).
• The waiver of the affiliation rules does not apply to Company Z, because
Company Z is in the construction industry. Under SBA’s affiliation rules, 13
CFR 121.301(f)(1) and (3), Company Y and Company Z are affiliates of one
another because they are under the common control of Company X, which wholly
owns both companies. This means that the size of Company Z is determined by
adding its employees to those of Companies X and Y. Therefore, Company Z is
deemed to have more than 500 employees, together with its affiliates. However,
Company Z may be eligible to receive a PPP loan as a small business concern if
it, together with Companies X and Y, meets SBA’s other applicable size
standards,” as explained in FAQ #2.

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