On Wednesday, May 13, the Small Business Administration (SBA), issued a new Interim Final Rule which authorizes increased PPP loans for partnerships and companies with seasonal employees.
By way of background, the SBA issued an April 14 Interim Final Rule which prohibited partners in partnerships from applying for separate PPP loans as self-employed individuals. The Rule dictated that partner income up to an annualized $100,000 should instead be reported as a payroll cost in the partnership's PPP loan application. However, those partnerships that submitted PPP loan applications prior to the April 14 Interim Final Rule may not have included partner income in their payroll costs, meaning they did not receive the full loan amount for which they were ultimately eligible.
The May 13 Interim Final Rule allows PPP lenders to increase existing PPP loans to partnerships - even if the borrower has already received their loan proceeds. The SBA is authorizing lenders to make an additional loan disbursement. Borrowers do not have to submit a separate loan application, but will need to provide documentation to their lenders to support the increase. Additionally, the increase must be requested before the lender’s initial SBA Form 1502 is filed. The SBA requires lenders to file Form 1502 within 20 calendar days after the PPP loan is approved, but for loans approved before Form 1502 was made available, the form must be filed by May 22.
The SBA also issued an Interim Final Rule on April 28 for companies with seasonal employees. Seasonal employers were initially allowed to use their average monthly payroll for either the period of February 15, 2019 to June 30 2019, or March 1, 2019 to June 30, 2019. The April 28 Rule amended this requirement, and allowed an employer to use any consecutive 12-week period between May 1, 2019 and September 15, 2019 for the purposes of determining average monthly payroll costs. Similar to partnerships, companies with seasonal employees that submitted PPP loan applications prior to the April 28 Rule may not have received the full loan amount for which they were eligible. The May 13 Interim Final Rule also allows seasonal employers to request an additional loan disbursement in the same manner as described above.
We expect additional guidance to continue to be issued by the SBA and/or the Treasury in the coming days. We are actively monitoring the situation and will keep you apprised of any developments. If you have any questions about these or any other matters in the meantime, please contact your Kreischer Miller relationship professional or any member of our team. We also continue to update our COVID-19 Resource Center, which you can access here.
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