Paycheck Protection Program Interim Final Rule on Loan Increase

Paycheck Protection Program May 14, 2020 Update 

On May 13, 2020, the Department of Treasury issued an interim final rule (IFR) that allows for partnerships and seasonal employers to request an increase in their Paycheck Protection Program loan because there has been clarification and alternative methods on the maximum loan calculation for borrowers.

The partnership guidance issued on April 14, 2020 by the Small Business Administration (SBA) that 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.”  Prior to this rule, many borrowers did not include the compensation of partners in their maximum loan calculation.

All seasonal employers prior to the guidance issued on April 28, 2020 were required to use the period from February 15, 2020 through June 30, 2020 to calculate their maximum loan value; however, for many that period was not representative of their operations.  On April 28, 2020, the SBA issued an IFR that allowed for an alternative criterion for calculating the maximum loan value.  That alternative criterion included that a seasonal employer may 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.

The May 13, 2020 IFR allows partnerships and seasonal employers to request a loan increase (not to exceed the maximum $10 million amount), and lenders may process the request, if the borrower did not include any compensation for its partners or the seasonal employer would be eligible for a higher maximum loan amount.  The IFR provides for a timeframe that the request must be submitted by the lender (before the SBA Form 1502 for the loan is filed), which is generally 20 days after the loan was approved.  Requests for a loan increase after the 20-day period will not be forgiven.