What industries will not be eligible for the Paycheck Protection Program?

The Paycheck Protection Program is intended to provide economic relief to small businesses nationwide adversely impacted under the Coronavirus Disease 2019 (COVID-19) Emergency Declaration (COVID-19 Emergency Declaration) issued by President Trump on March 13, 2020.

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act or the Act) (P.L. 116-136) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The Small Business Administration (SBA) received funding and authority through the Act to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency. Applications were open to the public on April 3rd, 2020 and will remain open through June 30, 2020.

As expected, the rush to apply for the SBA’s Paycheck Protection Program (PPP) money was unprecedented. While millions of business owners now anxiously wait to hear back on the status of their SBA applications, many are left also asking themselves if their industry will even be deemed eligible.

Here’s who the SBA prohibits:

The SBA prohibits loan guarantees to “businesses primarily engaged in lending, investments, or to an otherwise eligible business engaged in financing or factoring.” The SBA lists 7 specific ineligible business types under this definition in the statutory code. They include the following:

  • Banks
  • Life Insurance Companies, but not independent agents
  • Finance Companies
  • Factoring Companies
  • Investment Companies
  • Bail Bond Companies
  • Other Businesses whose stock in trade is money

The PPP’s interim final rule refers to this statute as a rule for ineligibility as it applies to the PPP.

The statute does list a handful of businesses engaged in lending that may traditionally qualify for an exception. They are as follows:

    • A pawn shop that provides financing is eligible if more than 50% of its revenue for the previous year was from the sale of merchandise rather than from interest on loans.
    • A business that provides financing in the regular course of its business (such as a business that finances credit sales) is eligible, provided less than 50% of its revenue is from financing its sales.
    • A mortgage servicing company that disburses loans and sells them within 14 calendar days of loan closing is eligible. Mortgage companies primarily engaged in the business of servicing loans are eligible. Mortgage companies that make loans and hold them in their portfolio are not eligible.
    • A check cashing business is eligible if it receives more than 50% of its revenue from the service of cashing checks.
    • A business engaged in providing the services of a financial advisor on a fee basis is eligible provided they do not use loan proceeds to invest in their own

To learn more about the PPP program visit the FAQ for borrowers or consult your CPA or attorney to better provide guidance on your company’s eligibility.

If your company has already been declined for the PPP or does not qualify, call Merchant Funding Solutions today at 800-791-0430 to discuss alternative business funding solutions.

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