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SBA Releases Interim Final Rule on Loan Increases for Certain Partnerships and Seasonal Employers

05.13.2020

The SBA has released Interim Final Rule 9 (“IFR 9“), which provides guidance for certain partnerships and seasonal employers. On April 14, 2020, SBA posted an interim final rule (“IFR 2”) that, among other things, provided guidance for individuals with self-employment income. The rule stated, “if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.” On April 28, 2020, the Department of the Treasury posted an interim final rule (“IFR 4”) that provided an alternative criterion for calculating the maximum loan amount for PPP loans issued to seasonal employers.

Some PPP loans were approved to partnerships or seasonal employers before the additional guidance was issued, and, as a result, those businesses may not have received PPP loans in the maximum amount for which they are eligible. This interim final rule authorizes all PPP lenders to increase existing PPP loans to partnerships or seasonal employers to include appropriate amounts to cover partner compensation under the interim final rule posted on April 14, 2020, or to permit the seasonal employer to calculate its maximum loan amount using the alternative criterion posted on April 28, 2020.

Question: If a partnership received a PPP loan that did not include any compensation for its partners, can the loan amount be increased to include partner compensation?

Answer: Yes. If a partnership received a PPP loan that only included amounts necessary for payroll costs of the partnership’s employees and other eligible operating expenses but did not add 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. 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 the required documentation to support the calculation of the increase.

Question: If a seasonal employer received a PPP loan before the alternative criterion for determining the maximum loan amount for seasonal employers became available, can the loan amount be increased based on a revised calculation using the alternative criterion?

Answer: Yes. 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. 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 the required documentation to support the calculation of the increase.

The full text of the FAQ can be found here.

If you have any questions about your eligibility for a PPP loan, please contact our CARES Act Response Team.

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