Paycheck Protection Program – Additional Criterion for Seasonal Employers
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) authorizes the Department of the Treasury to issue regulations for the Paycheck Protection Program (“PPP”) administered by the Small Business Administration (“SBA”), including regulations that allow additional lenders to originate loans and establish terms and conditions. In this interim final rule, Treasury authorizes all lenders eligible to originate loans under the PPP to use an alternative criterion for calculating the maximum loan amount for PPP loans issued to seasonal employers.
In this rule-making, Treasury is addressing the needs of certain potential borrowers that are seasonal employers by allowing seasonal employers to use an alternative base period for purposes of calculating the loan amount for which they are eligible under the PPP.
What is the existing base period for seasonal employers?
The CARES Act permits seasonal employers to calculate their maximum loan amount by using their average monthly payments for payroll during the 12 weeks beginning February 15, 2019, or at the election of the eligible borrower, March 1, 2019, and ending June 30, 2019. Some seasonal employers, however, have seasons that occur later in the year.
How does this rule affect the calculation of the maximum loan amount for seasonal employers?
A seasonal employer may determine its maximum loan amount for purposes of the PPP by reference to the employer’ average total monthly payments for payroll the 12 weeks beginning February 15, 2019, or at the election of the eligible borrower, March 1, 2019, and ending June 30, 2019. Under this interim final rule, a seasonal employer may alternatively elect to determine its maximum loan amount as the average total monthly payments for payroll during any consecutive 12-week period between May 1, 2019, and September 15, 2019.
If a seasonal business was dormant or not fully operating as of February 15, 2020, is it still eligible?
Yes, in evaluating eligibility, a seasonal business will be considered to have been in operation as of February 15, 2020, if the company was in service for any eight weeks between May 1, 2019, and September 15, 2019.
Are any other SBA rules or guidance for the PPP affected by Treasury’s interim final rule?
No. This interim final rule only provides certain employers with an alternative means of calculating the maximum loan amount. All other terms and conditions in the PPP remain unchanged. All PPP applicants, borrowers, and lenders should continue to use existing SBA forms and follow all requirements outlined in the CARES Act and SBA regulations, except for the alternative approach described above for calculating the maximum loan amount.