PPP and EIDL loans for foreign investors in the US holding temporary visas during COVID-19
PPP and EIDL loans for investors on US visas and foreign-owned U.S. Companies during COVID-19
The recent Coronavirus pandemic combined with the COVID-19 restrictions on international travel and the “Shelter in Place” orders issued by state governments, cities and counties throughout the US to slow down the spread of the virus have led inadvertently to mass unemployment and a sharp decline in consumer demand for many products and services and uncertainty for many businesses.
With the exception of those business that provide essential goods and services such as groceries, household goods and healthcare services, among others, the rest have been devastated by the ongoing pandemic including those US businesses owned by foreign investors who are conducting business in the United States on various US business and investors visas, including E-1, E-2, L-1, O-1, EB-5 and EB-1.
The foreign investors often own successful businesses in the US that employ local US workers and support the US economy by purchasing goods and services from other businesses such as commercial real estate, utilities, transportation services, IT services, insurances and food, among others. However, with the ongoing COVID-19 pandemic some of these businesses struggle to maintain liquidity and continue to pay their employees while consumer demand and preference shifted overnight. To assist in these unprecedented times, the US government is providing financial assistance to businesses through the PPP loan program and the Small Business Administration Economic Injury and Disaster Loan program (SBA EIDL loan).
Here, we discuss the eligibility of foreign investors on E-1, E-2, L-1, O-1, EB-5 visas and foreign-owned companies to apply and obtain the PPP loan and the SBA EIDL loan.
The PPP program for foreign investors on E-1, E-2, L-1, O-1, EB-5 visas and foreign-owned companies
Foreign-owned companies and individuals with US businesses holders of E-1, E-2, L-1, O-1, EB-5 visas and other visas can qualify for the PPP loan program of the Small Business Administration (SBA) during the Coronavirus crisis, provided that they meet all requirements for the program.
The Paycheck Protection Program (PPP) is an SBA loan established specifically for COVID-19 impact by the CARES Act to assist small businesses with the resources they need to keep their workforce employed during the Coronavirus crisis, maintain payroll, hire back employees who may have been laid off and cover overhead expenses such as rent, utilities, loan interest payments and others. The PPP loan is implemented by the SBA with support from the Department of Treasury.
The PPP loan implemented by the SBA is designed to incentivize US small businesses to keep the employees on payroll throughout the COVID-19 pandemic. Due to its emphasis on keeping workers employed during the crisis, the PPP loan was designed by the US Senators to cover as many companies as possible and with the intention to include those companies owned by foreign nationals, holders of nonimmigrant and immigrant visas, E-1, E-2, L-1, O-1, EB-5, EB-1 and other visas, employing US workers.
The PPP loan is available to the following entities:
- Any US small business with 500 employees or fewer whose principal place of residence is in the United States or meets the SBA industry standard if more than 500 employees. The eligibility includes foreign-owned small businesses, including businesses owned by E-1, E-2, L-1, O-1, EB-5, EB-1 visa holders and others.
- Any 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with 500 employees or fewer whose principal place of residence is in the United States or meets the SBA industry standard if more than 500 employees.
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location. The eligibility includes foreign-owned small businesses.
- Sole proprietors, independent contractors, and self-employed persons. The eligibility includes foreign-owned small businesses, including businesses owned by E-1, E-2, L-1, O-1, EB-5, EB-1 visa holders and others.
The PPP loan is fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 60% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required.
The PPP loan application and approval deadline for all qualifying businesses is June 30, 2020 and there may be a possible extension to the PPP deadline to August 8, 2020.
The SBA EIDL program for foreign investors on E-1, E-2, L-1, O-1, EB-5 visas and other.
US businesses owned by foreign individuals who hold E-1, E-2, L-1, O-1, EB-5 visas and other visas can apply for the EIDL loan provided that they meet all requirements for the program. However, the SBA has recently denied these loans because of eligibility issues. Please note that PPP and EIDL loan programs of the SBA are exempt from the public charge rule.
After reviewing the EIDL application for the US businesses, the SBA requests documents from the beneficial owner to determine if he or she is a “qualified alien.” For the purposes of the EIDL, “qualified aliens” include green card holders, refugees, asylum seekers and even individuals whose deportation proceedings have been withheld among other and it does not include individuals who are legally admitted into the US on a nonimmigrant status such as the E-1, E-2, L-1 and O-1 visas or in the process of becoming permanent residents. As a result, foreign investors and beneficial owners of US companies without a green card are not considered “qualified aliens” and their companies are denied the EIDL loans, leaving them without financial assistance to cope with COVID-19 and continue to pay their bills as they come due and salary and wages to their employees.
However, we recommend that foreign-owned US businesses and foreign investors having a majority ownership in US businesses who are on various US business visas such as the E-1, E-2, L-1, O-1, EB-5 apply for the SBA EIDL loans during the Coronavirus pandemic.
If you have questions or you need assistance, contact our business and immigration lawyers in Miami, Florida.
Malescu Law P.A. – Business & Immigration Lawyers