Opportunity for Partnerships to Increase their PPP Loan
May 14, 2020
On May 13, 2020, the SBA released an Interim Final Rule on Loan Increases relating specifically to compensation of partners in a partnership.
Prior to clarification provided by the SBA on April 14, 2020 (Guidance on SBA Loans for Self-Employed) and on April 24, 2020 (Calculating Max Loan Amounts), it was expected that compensation to partners was not to be included in calculating the PPP loan amount. In fear of PPP funds exhausting quickly, many partnerships filed their applications as quickly as possible, which may have occurred prior to April 14, and therefore without partner compensation included in their calculations. The Interim Final Rule offers further options for “partnerships that received a PPP loan that did not include any compensation for its partners” on their application.
For partnerships that received a PPP loan and only included the partnership’s employees in the loan amount calculation, the SBA is providing the option for lenders to submit a request to the SBA to increase the PPP loan amount to include partner compensation. Although the previously issued Interim Final Rule on Disbursements (Interim Final Rule – Disbursements of PPP Proceeds) requires PPP loans to be disbursed in a single disbursement, this request allows the lender to make an additional disbursement.
Although an additional disbursement is allowed, the SBA specifically stated the maximum loan amounts still apply, including $10 million for an individual borrower or $20 million for a corporate group.
Let Aprio Help
We view this as very important for partnerships who applied for a PPP loan and did not include partner compensation as part of the loan amount calculation.
If you would like to discuss how to calculate partner income for the loan amount increase, or how to interpret and document spending requirements for PPP forgiveness with an SBA loan expert, contact Aprio here.
Disclaimer for services provided relative to SBA programs and the CARES Act
Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.
The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.
Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.
You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.
In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.
Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs.
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About the Author
Tommy is the partner-in-charge of Aprio's Retail, Franchise and Hospitality group. His practice focuses on small and mid-sized retail, franchise and hospitality companies and real estate firms. Tommy has expertise in corporate structuring arrangements, multi-state and international tax planning, and corporate and individual tax mitigation.