On May 13, the SBA released an Interim Final Rule (“IFR”) which will enable certain partnerships that applied for Paycheck Protection Program (“PPP”) loans but did not include partner income in their loan amount to go back to their lender and get an additional disbursement.
- If a partnership received a PPP loan that only included amounts necessary for the payroll costs of the partnership’s employees and other eligible operating expenses, but did not include any amount for partner compensation, the lender may electronically submit a request - through SBA’s E-Tran Servicing site - to increase the PPP loan amount to include appropriate partner compensation, even if the loan has been fully disbursed.
- The IFR requires that the lender’s first SBA Form 1502 report to SBA on the PPP loan has not been submitted.
- After the initial SBA Form 1502 report on the PPP loan has been submitted to SBA, or after the date the first SBA Form 1502 was required to be submitted to SBA, the loan cannot be increased.
- The SBA has already extended the deadline for submission of the initial SBA Form 1502 for such loans from May 18, 2020 to May 22, 2020 in its IFR posted on May 8, 2020.
- The limit for self-employment income of general active partners which may be reported as a payroll cost on a PPP loan application is still up to $100,000 annualized
- In no event can the increased loan amount exceed the maximum loan amount allowed under the PPP Program, which is $10 million for an individual borrower or $20 million for a corporate group. Additionally, the borrower must provide the lender with required documentation to support the calculation of the increase.
If you applied for a PPP loan without including partner income, you should consider amending a current application or request an additional disbursement. Only your bank can tell you if this is a timely request or if the Form 1502 has already been submitted.
There are also new rules for seasonal employers now that there is an alternative criterion for determining the maximum loan amount.
Feel free to contact a Friedman professional with any questions.