On May 13, 2020, the SBA and Treasury issued Interim Final Rule on Loan Increases, allowing partnerships and seasonal businesses to potentially qualify for higher loan amounts from the Paycheck Protection Program (PPP) — even if they have already received a disbursement.
Prior to the Interim Rule
Partnerships, including LLCs taxed as partnerships, were allowed to begin filing for PPP loans on April 3, 2020. At that time, the guidance did not include partners in the payroll calculation. The assumption was that partners would file as self-employed.
However, on April 14, the SBA changed course, posting an interim final rule that said a partner in a partnership would not be able to file for a separate PPP loan. It stated that general active partners in a partnership, those with self-employed income, should be reported in the payroll costs calculation of the partnership, up to $100,000 annualized. On April 28, another interim final rule added an alternate criterion for seasonal employers.
In both of the cases above, the guidance that came after April 3 could have allowed partnerships and seasonal businesses to potentially apply for higher loan amounts, had the guidance been released earlier.
How to Receive Additional Funds
Below are the details of the Interim Final Rule issued May 13:
- PPP lenders will increase existing PPP loans to:
a. Partnerships to include partner compensation up to $100,000, annualized per partner.
b. Seasonal employers to use the alternative criterion to calculate the maximum loan amount.
- Lenders are allowed to make an additional disbursement for PPP loans already disbursed but increased due to the changes listed above.
- The rule maintains the $10 million limit for an individual borrower and $20 million limit for a corporate group.
- The borrower must provide the lender with required documentation to support the increase.
- The increase will only be allowed if the lender has not submitted the initial SBA Form 1502 to the SBA. If it has already been submitted, the borrower will not be able to increase the loan.
If you believe you may qualify for an increase under the new Interim Rule, contact your bank as soon as possible, as the SBA Form 1502 was originally due on May 18 but has been extended to May 22.
Contact Adam Hill at firstname.lastname@example.org or Dave Sobochan at email@example.com to discuss this topic further.
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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.