On May 13, 2020, the Small Business Administration (“SBA”) released one provisional final rule (“IFR”) Enabling certain Partnerships who have applied for Paycheck Protection Program (“PPP”) loans but do not include Affiliate Income in “Wages and Payments” to modify their loan applications to include Affiliate Compensation. In particular, a change is permitted even if the PPP loan has already been disbursed. Although not specifically stated, the IFR should apply equally to LLCs that are taxed as partnerships to allow LLC members to increase PPP loan amounts to include member raffles.
An SBA provisional final regulation from April 14, 2020 Clarified that a partner in a partnership may not submit a separate PPP loan application as a self-employed. Instead, the self-employed self-employed person’s income may be reported in the partnership’s PPP loan application as wage costs up to USD 100,000 on an annual basis. Unfortunately, many partnership and LLC borrowers had already been approved for loan with no mechanism in place to modify their loan applications. The new IFR, issued almost a month later, allows eligible partnerships who have calculated their loan amount before April 14, 2020 to increase their loan amount accordingly.
The IFR also allows a seasonal employer who has received a PPP loan prior to the alternative criterion for determining the maximum loan amount for seasonal employers became available via bridgepayday on April 28, 2020to work with his lender to increase his loan amount.
In either case, the borrower must provide documentation to aid in the calculation of the increase.
Loan increases are not available if a borrower’s lender has already submitted a Form 1502 for the loan or if the date on which the lender was required to submit Form 1502 has expired. Lenders must submit Form 1502 twenty calendar days after the loan is approved or by May 22 for loans approved before the updated Form 1502 was made available by the SBA.
By May 14, 2020, the SBA reported that $ 193,659,109,822 of the $ 310 billion allocated for the second round of PPP had been approved, leaving approximately $ 116 billion available.
Borrowers eligible for an increased loan under the IFR should contact their lender as soon as possible if interested.