SBA allows for an increase to existing PPP loans to partnerships
On May 13th, the SBA issued a new interim final rule allowing partnerships to increase existing PPP loans. The new rule applies to partnerships that completed their PPP applications under the originally issued guidance.
The banks started accepting PPP applications on April 3, 2020 and based on the guidance available at that time, there were a lot of partnerships that didn’t include general active partner income as a payroll cost. As a result, some partnerships applied for and received PPP loans that were less than the maximum eligible amount.
In the interim final rules that were issued on April 14, 2020, the guidance stated that “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.” This additional guidance allowed partnerships to include partner income, but a lot of banks were not allowing partnerships to amend their PPP loan applications in order to include the partners.
To correct this, the newest final rules allow partnerships to receive additional PPP loan funds for the partners that were not included on the original application. In the same interim final rules, it says that the partnerships are able to receive this additional funding only if the bank hasn’t already filed SBA Form 1502 with the SBA. If this applies to you, YOU NEED TO CONTACT YOUR BANK AS SOON AS POSSIBLE.
“If a partnership received a PPP loan that did not include any compensation for its partners, can the loan amount be increased to include partner compensation?https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Loan-Increases.pdf
Yes. If a partnership received a PPP loan that only included amounts necessary for payroll costs of the partnership’s employees and other eligible operating expenses, but did not include any amount for partner compensation, the lender may electronically submit a request through SBA’s E-Tran Servicing site to increase the PPP loan amount to include appropriate partner compensation, even if the loan has been fully disbursed, provided that the lender’s first SBA Form 1502 report to SBA on the PPP loan has not been submitted. After the initial SBA Form 1502 report on the PPP loan has been submitted to SBA, or after the date the first SBA Form 1502 was required to be submitted to SBA, the loan cannot be increased.”