The SBA issued guidance on April 14th regarding how a partner’s compensation should be calculated for PPP loans. Prior to this guidance it did not appear that a partnership could include a partner’s compensation in the loan calculation. Unfortunately, this guidance was issued too late for many partnerships who had already applied and received approval for their loans which did not include partner compensation. Additionally, on April 28th the SBA issued guidance allowing for an alternative criteria calculation for seasonal businesses to utilize in determining their loan amounts which may have resulted in larger loans for many of these businesses. Unfortunately, this guidance was also too late for many seasonal businesses which calculated their loans based on the original SBA guidance. Due to the lateness of the guidance issued in both instances, the SBA has decided to allow for an additional disbursement to be made on the PPP loans for impacted businesses.
Partnerships may now receive additional loan proceeds for each general active partner’s self-employment income reported as payroll costs, up to $100,000 annualized (maximum of an $8,333 average monthly amount), on the partnership’s loan application. Additionally, seasonal businesses may recalculate their loans based on the alternative criteria and revise their applications to receive the difference between the two calculations. The alternate criteria is designed for seasonal employers whose busy season occurs later in the year. This criteria allows for a seasonal employer to calculate payroll costs based on any consecutive 12-week period between May 1 and September 15, 2019.
There is one catch, however, for an impacted business to receive the additional PPP proceeds. In order to receive the loan increase, the lender must submit the request for increased PPP funds to the SBA prior to the initial filing of Form 1502 for the loan. Based on SBA guidance, Form 1502 for many PPP loans must be filed by the lender with the SBA by May 22, 2020. Impacted borrowers should contact their lender immediately to notify them of the requested increase and learn how to submit the revised application.
