SBA Authorizes Increase in PPP Partnership Loans, Extends Safe Harbor until May 18
The United States Small Business Administration (SBA) has issued a new provisional final rule On Wednesday evening, the door opened for lenders to increase existing Paycheck Protection Program (P3) loans to partnerships and seasonal employers. In separate guidelines, the SBA extended the safe harbor for the repayment of PPP loans from May 14 to May 18.
The new interim final rule on partnerships addresses situations in which some have completed their loan application before the guidelines were released on April 14. Provisional rule of April 14 prohibits partnership partners from applying for a separate PPP loan for themselves as freelancers. Instead, the self-employment income of general active partners was to be reported as a salary cost, up to $ 100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.
The move meant that partnerships, including accounting firms, that had previously submitted PPP applications without including partners’ self-employment income were unlikely to receive the maximum amount of PPP loans for which they were eligible. Likewise, a provisional final rule of April 28 established another criterion for calculating the maximum amount of PPP loans granted to seasonal employers.
The interim final rule released Wednesday allows all PPP lenders to increase existing PPP loans to partnerships or seasonal employers to include the appropriate amounts to cover partner compensation in accordance with the April 14 interim final rule, or to allow the seasonal employer to calculate the maximum loan amount. using the alternative criteria posted on April 28.
Additionally, although the interim final rule on disbursements issued on April 28 requires that PPP loans be made in a single disbursement, if an increased PPP loan has already been disbursed, this interim final rule allows the lender to make an additional disbursement. the increase in loan proceeds prior to submitting the initial SBA Form 1502 which includes this loan.
The extension of the safe harbor for the return of PPP funds until May 18 is granted in the answer to question 47 on PPP FAQ page. The SBA had previously extended the Safe Harbor from May 7 to 14. The Safe Harbor allows borrowers who have received PPP loans to return them if they are unable to certify in good faith the necessity of their loan applications.
The SBA too issued a safe harbor Wednesday, stating that companies that, along with their affiliates, have accepted less than $ 2 million in PPP funds will be presumed to have done good faith certification of the necessity of their loan applications.
the SBA had warned April 23, that companies with substantial access to liquidity may not be eligible for PPP loans. On April 28, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced that the SBA would review all PPP loans over $ 2 million to ensure borrower self-certification was appropriate.
Out of concern for whether their loans would be deemed appropriate, some large companies that initially received PPP funds returned them. For the same reason, some small business leaders have also considered returning their PPP funds or have been reluctant to apply for PPP loans. The $ 2 million threshold provides a safe haven for organizations with smaller loans, and extending the deadline to May 18 gives organizations more time to decide whether or not to repay their loans.
Congress established the PPP to provide assistance to small businesses during the coronavirus pandemic under the Coronavirus Help, Relief and Economic Security Act, PL 116-136. PPP funds are available to small businesses that were in operation on February 15 with 500 or fewer employees, including nonprofits, veterans organizations, tribal groups, freelancers, individual businesses and independent contractors. Businesses with more than 500 employees in certain industries can also apply for loans.
The forgivable loans were designed to help employers keep their employees paid and to support their organizations facing the economic hardships created by the coronavirus pandemic. An eligible beneficiary of a secured loan may receive debt relief on the loan in an amount equal to the sum of the payments made for the following expenses (subject to limitations) during the eight week covered period beginning in the date of granting of the loan covered: (1) staff costs; (2) payment of interest on any covered mortgage bond; (3) payment of any covered rent obligation; and (4) any covered public service payment. Section 1106 (i) excludes from gross revenue any amount remitted under the P3.
the AICPA Paycheck Protection Program Resources Page houses resources and tools produced by the AICPA to help cope with the economic impact of the coronavirus.
For more information and stories on the coronavirus and how CPAs can handle the challenges of the outbreak, visit the JofAon the Coronavirus Resources page or subscribe to our email alerts for the latest P3 news.
– Jeff drew ([email protected]) is a JofA editor-in-chief.