SBA To Allow Lenders to Increase Existing PPP Loans for Partnerships and Seasonal Employers

The SBA released new interim final rules on May 13, 2020 to allow partnerships and seasonal employers to increase existing Paycheck Protection Program (“PPP”) loans in limited circumstances. Partnerships and seasonal employers were the subject of additional clarification regarding the methodology to be applied for calculating the maximum PPP loan they are eligible for. Borrowers who applied for loans prior to the release of the updated guidance will be allowed to recalculate their maximum loan amount and receive a supplement disbursement.

Interim final guidance posted by the SBA on April 14, 2020 clarified that a partner in a partnership was to include their self-employment income as a payroll cost (up to $100,000 annualized) on the PPP loan application of the partnership. Prior to this guidance many lenders believed individual partners would each need to apply for their own PPP loan. The updated guidance specifically prohibited partners from applying for their own PPP loans, leaving those who had previously been approved unable to obtain the maximum allowable loan amount.

Another interim final rule was posted on April 28, 2020 providing an alternative criterion for calculating the maximum loan amount for seasonal employers. The CARES Act provided seasonal employers to calculate its maximum loan amount using “the 12-week period beginning February 15, 2019, or at the election of the eligible borrower, March 1, 2019, and ending June 30, 2019.” Under the interim final rule, seasonal employers were permitted to use any consecutive 12-week period between May 1, 2019 and September 15, 2019 for purposes of this calculation.

Borrowers who believe they may be eligible for a higher loan amount should immediately contact their lenders. Loans are only eligible to be increased prior to the lender’s first SBA Form 1502 report to the SBA on that loan. Lenders are required to electronically submit SBA Form 1502 information on PPP loans within 20 calendar days after a PPP loan is approved or by May 22, 2020 for loans approved before April 28, 2020. As such, borrowers have only a small window of time available to apply for a loan increase.