Interim Final Rule: Loan Increases
May 14, 2020
On Wednesday May 13, 2020, the Small Business Administration (SBA) published an Interim Final Rule relating to the Paycheck Protection Program (PPP). This item summarized key loan increase provisions of the PPP and clarified areas where The Coronavirus Aid, Relief, and Economic Security Act (CARES) was either unclear or in the eyes of the SBA, needed to treat certain items with more clarity or specificity. A link to this ruling may be found here.
Key Provisions or Clarifications in the Interim Final Ruling
Below we will focus only on those items we regard as new, clarified, and key for our clients and in no way does the below purport to be an exhaustive list. Additionally, those items below that are highlighted are those deemed to have ‘changed’ or become ‘clarified’ as part of this ruling:
For partnerships that previously received loans that excluded partner compensation, up to the allowable limits, the Treasury and SBA have clarified that loan increases are permitted under the program to retroactively capture those individuals. This inclusion allowance was clarified in an interim final rule issued April 14, 2020 here. Additionally, seasonal employers that applied prior to the guidance issued on April 28, 2020 that allowed alternative measurement dates, can similarly increase the loan amount. However, these loan increases may only occur if the lender has not submitted or been required by the date applying for the increase to have submitted the SBA Form 1502.
As outlined in section 2b of this Interim Final Rule, lenders must submit the SBA form 1502 within 20 calendar days after the PPP loan is approved or for loans approved before the updated form 1502 was made available by May 22, 2020 as updated here. The initial rules relating to the SBA Form 1502 from April 28, 2020 (originally posted) can be found here. Borrowers should check with their lender as to their eligibility to consider a loan increase.
Consistent with all other rules, consideration of an active partner’s annual compensation will not exceed $100,000. Documentation will be required to support the increase request.
Coupled with the certification news also issued on May 13th, 2020 discussed here, it is expected the remaining portion of funds will be quickly exhausted. As of May 8th, 2020, according to the report here, approximately $120 billion remained in available PPP funds.
Our Management Consulting team is willing and eager to assist you by advising on documentation best practices, modifying your chart of accounts and calculating initial projections. We can be reached at: consulting@kha.cpa.
As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress or other authorities as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.
These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This by no means is a recommendation to obtain a loan or attempt to apply for a loan. There are many unknowns at this time regarding what other stimulus (grants or other loan options) that may become available with pending and future bills, executive orders, or emergency declarations to follow, that may become laws. Consult your legal and business advisors prior to making financing decisions. This is intended for illustrative and discussion purposes only.