Paycheck Protection 5/14 Update
Treasury issued a significant amount of new information on Wednesday, May 13th. In addition to updating their FAQs over the Paycheck Protection Program (PPP), they also issued a new Interim Final Rule dealing with potential Loan increases.
Frequently Asked Question Updates:
Treasury updated their FAQs to let borrowers know how they would interpret the “good-faith certification” regarding the necessity of the PPP loan request. Our analysis of that update can be found here.
In addition, treasury also released Question 47, extending the May 14th repayment date. Under the old rules, if a borrower believed they could not meet the “good-faith certification” requirements, they were allowed to repay their loan by May 14th with no consequences. With Treasury issuing new guidance on this certification on May 13th, an extension of this safe harbor date was necessary. Under this pronouncement, Treasury extended the date to May 18th.
Interim Final Rule regarding Loan Increases:
The PPP has been taking applications and providing loans for well over a month now. Unfortunately, due to the speed at which Treasury and the SBA have had to work, the rules have changed multiple times since the first applications were submitted. As a result of this, certain borrowers may have submitted a loan application that was too low, due to the understanding of the rules at the time. This interim final rule provides guidance for increasing the loan amounts in certain situations.
On April 14th, the SBA and Treasury issued a final rule that provided guidance on self-employment income. This rule stated, “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 payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership”. Additionally, on April 28th, an interim final rule was issued providing alternative calculations for the maximum loan amounts for seasonal employers. Unfortunately, many partnerships and seasonal businesses had submitted applications prior to the issuance of these rules and as a result ofo the confusion, many businesses were not able to maximize their loan request.
This interim final rule provides the ability for lenders to increase PPP funds for partnerships or seasonal employers that applied prior to the issuance of the above referenced rules. The new rule only adjusts partnerships or seasonal employers effected by the changes above. Any other businesses are not currently eligible for loan increases.
We will continue to monitor these changes to let businesses know of important issues regarding the PPP and other Stimulus Programs.