On May 13, the SBA released an Interim Final Rule (“IFR”) which may enable partnership borrowers 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.  Additionally, seasonal employers who applied before the April 28th Interim Final Rule was released, may also request a loan increase based on the revised calculation.

Additionally, Senator Rubio indicated, according to ABC News, that final forgiveness guidelines may be issued as early as today.  We should all send the lenders a socially distant thank you and virtual hugs for supporting small businesses through the daily rule changes, technological issues, and massive ambiguity from the SBA.

We will host a Forgiveness webinar early next week if guidelines are released by tomorrow morning.  Please look out for the invitation in your email and / or request we add you to our distribution list.  You can watch a recording of our most recent webinar by registering HERE.

INCREASES RELATED TO PARTNER COMPENSATION OMISSION 

  • 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 (limited to the $10 million for an individual borrower; $20 million for a corporate group) to include appropriate partner compensation, even if the loan has been fully disbursed.
  • The IFR allows for the loan amount to be increased only if the lender has not submitted for 1502 to the SBA (this form is a Form lenders use in the 7(a) program to to collect payment and loan information.  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 borrower must provide the lender with documentation to support the calculation of the increased amount.
  • 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.  On April 24, the SBA posted guidance on how to calculate the maximum the maximum amount for partnerships (and other borrower types), that guidance can be found HERE.

INCREASES RELATED TO SEASONAL BORROWERS WHO APPLIED BEFORE 4/28 ADDITIONAL CRITERION INTERIM FINAL RULE (IFR) 

  • If a seasonal employer received a PPP loan before the alternative criterion
    for such employers was posted on April 28, 2020, and would be eligible for a higher maximum loan amount under the alternative criterion, the lender may electronically submit a request through SBA’s E-Tran Servicing site to increase the PPP loan amount.
  • The IFR allows for the loan amount to be increased only if the lender has not submitted for 1502 to the SBA (this form is a Form lenders use in the 7(a) program to to collect payment and loan information.  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 borrower must provide documentation to support the calculation of the increase.

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.

The SBA 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.

If you applied for a PPP loan without including partner income or are a seasonal borrower that applied before the April 28 issuance of the Interim Final Rule for Additional Criterion for Seasonal Employers, you should consider recalculating your maximum loan amount to determine if you may be eligible for a loan increase.  Contact us with questions about your potential eligibility for an increase.   Only your lender can tell you if Form 1502 has been submitted.

We are happy to discuss any questions or comments you may have.  Our team is working and available to review with you.  Please contact our office at 610-544-5900 or cares@brinkersimpson.com .

We are in this together,

Brinker Simpson & Company, LLC

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice & cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).