Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Small Business Administration (SBA) is tasked with administering the Paycheck Protection Program (PPP), the loan program intended to allow employers to continue to pay their employees and assist with certain other expenses resulting from the COVID-19 pandemic.
As the PPP went into immediate effect without the standard comment period, the SBA continues to issue additional guidance in the form of Frequently Asked Questions (FAQs) and responses as well as Interim Final Rules (IFRs). The most recently updated FAQs, current as of May 13, 2020, are available here and the most recently issued IFRs are available here. Importantly, the U.S. government will not challenge lender PPP actions that conform to the FAQs, and to IFRs and any subsequent rulemaking in effect at the time.
1. Good Faith Certification Extension of Repayment Date
In the most recently updated FAQs, the SBA extended the repayment date for borrowers to avail themselves of the good faith certification safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider the new guidance issued by the SBA – borrowers do not need to apply for this extension.
2. Loan Increases for Partnerships that Did Not Include Partner Compensation in Initial Loan Application
In the most recent IFR, the SBA advised 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 the 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 the SBA on the PPP loan has not been submitted.
After the initial SBA Form 1502 report on the PPP loan has been submitted to the SBA, or after the date the first SBA Form 1502 was required to be submitted to the SBA, the loan cannot be increased. In no event can the increased loan amount exceed the maximum loan amount allowed under the PPP Program, which is $10 million for an individual borrower or $20 million for a corporate group. Additionally, the borrower must provide the lender with required documentation to support the calculation of the increase.
Borrowers who wish to increase their loan amount to include partner compensation should contact their lender immediately.
Attorney Advertising. The information contained in this Legal Alert provides a general summary of the topics covered and is not intended to be and should not be relied upon as legal advice. You should consult with your legal counsel for advice and before making legal, business or other decisions.
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