The CARES Act created the Paycheck Protection Program ("PPP"), which amended the Small Business Act ("SBA") to provide short term loans to companies with fewer than 500 employees and other companies (such as those in the restaurant and hospitality industry). Such loans may be eligible for full forgiveness if used for payroll and other business expenses and all other statutory requirements are met. The SBA continues to issue guidance on a rolling basis, which can impact a company's eligibility for the loan, use of the loan, and the level of forgiveness
Increased Loans for Partnerships Guidance
On May 14, 2020, SBA posted an interim final rule mandating that 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 (up to $100,000 annualized), 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. The borrower must provide the lender with required documentation to support the calculation of the increase. This rule comes on the heels of SBA's April 14, 2020, interim final rule that states: "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."
Originally published May 15, 2020
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