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CARES Act – Additional SBA Changes May Allow Added Funding on PPP Loans

The Small Business Administration (“SBA”) published new guidance on May 13 that allows some companies to obtain increased funding on their previously funded PPP loans. The new funding is available for some partnerships and some seasonal employers. This new guidance fixes some major issues in the PPP loan program. However, the SBA is providing a short timeframe to apply for additional funding under this guidance. Businesses must apply for the additional funding by May 22 or within 20 days of the approval of their loan.

Partnership Changes

On April 14, the SBA made a major change in the way the PPP loans apply to partnerships. Prior to this change, a partnership was supposed to apply for its PPP loan based only on wages it pays to employees and the individual partners were supposed to apply for PPP loans based on their self-employment income. The April 14 guidance changed the rules so that the self-employment income of the partnerships could only be included in the PPP loan application of the partnership.

This change created a major issue for partnerships that had already applied for PPP loans. The loan amounts on those applications were based only on the employee wages of the partnerships and did not include the partner self-employment income. Each business is only allowed to apply for one PPP loan and the partners were no longer allowed to obtain their individual PPP loans.

The new guidance that the SBA issued on May 13 corrects this issue. Partnerships can obtain additional funding on their PPP loan to add the self-employment income of the partners to the loan calculation.

Seasonal Employers

The CARES Act provided two base time periods for seasonal employers to calculate their loan amount: the 12-week period beginning February 15, 2019 or the period from March 1, 2019 through June 30, 2019. For seasonal employers whose peak employment is outside these time periods, these options did not allow loans that properly cover the employers’ payroll needs.

The SBA added an additional option for the business to choose any 12-week base period that falls between May 1, 2019 and September 30, 2019. For any seasonal employers whose peak employment falls in the summer, this option should produce a large loan.

Conclusion

Businesses who may qualify for additional PPP funding because of the new SBA guidance should move quickly to recalculate their loan amounts. Then they should consider filing an amended loan application to increase their forgivable loan amount.

If you have any questions about PPP loans and this development, reach out to us at 303-989-7600.