Treasury Issues Interim Final Rule on Paycheck Protection Program Loan Increases
On May 13, 2020, the Treasury Department issued an interim final rule that provides guidance on increases to certain Paycheck Protection Program (PPP) loans issued by the Small Business Administration (SBA) to partnerships and seasonal employers. The interim final rule supplements (1) an April 14, 2020, interim final rule which provides that self-employment income of partners may be reported as a payroll cost (85 FR 21747); and (2) an April 28, 2020, interim final rule detailing alternative criterion for calculating the maximum loan amount for PPP loans issued to seasonal employers (85 FR 23917).
A summary of the key guidance provided in the May 13 interim final rule follows:
- Increases to Partnership Loans – If a partnership received a PPP loan that only included amounts necessary for payroll costs of employees and other eligible operating expenses, but did not include partner compensation, the loan lender may submit a request through the SBA’s E-Tran Servicing site to increase the loan amount to include partner compensation up to the cap of $100,000 annualized (even if the loan is fully disbursed), so long as the lender has not yet submitted SBA Form 1502.
- Increases to Seasonal Employer Loans – If a seasonal employer received a PPP loan before the alternative criterion for calculating the maximum amount for such loans was issued on April 28, and the seasonal employer is eligible for a higher loan amount under the alternative criterion, the loan lender may submit a request through the SBA’s E-Tran Servicing site to increase the loan (even if the loan is fully disbursed), so long as the lender has not yet submitted SBA Form 1502.
- Form 1502 Submission – A lender may request an increase in a partnership or seasonal employer loan only prior to submission of the initial SBA Form 1502 for such loan. Note that the interim final rule does not affect lender submission requirements for Form 1502—the form must be submitted within 20 calendar days after a PPP loan is approved. Loan increases submitted outside the required time frame will not be forgiven.
- Maximum PPP Loan Amount – If a loan is eligible for increase, in no event can the increased loan amount exceed the maximum loan amount allowed for PPP loans—$10 million for individual borrowers or $20 million for a corporate group.
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