Additional SBA Guidance Released for PPP Loans

Below we’ve summarized potential implications of the latest SBA updates to the Paycheck Protection Program (“PPP”) Loans.

• “Safe Harbor” for Returning PPP Loan Funds Extended to May 18
  • The application for a PPP Loan required the applicant to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations” of the applicant. We refer to this certification as the “necessity certification”.
  • Previously, the Small Business Association (“SBA”) announced that recipients of PPP Loan funds who returned such funds by May 7 would be deemed to have the “necessity certification” in good faith. The SBA later extended the “safe harbor” to May 14.
  • This “safe harbor” for returning PPP Loan funds has now been extended to May 18.
  • Previous updates and analysis regarding the “necessity certification” are available here, here and here.

• Opportunity for Increased PPP Loan Amounts for Certain Partnerships and Seasonal Employers
  • Recent SBA guidance increased the amount of PPP Loan funds available to certain partnerships and seasonal employers. If a partnership applied for PPP Loan funds prior to April 14 or a seasonal employer applied for PPP Loan funds prior to April 28 (i.e., calculating maximum loan amount eligibility without the benefit of the subsequent SBA guidance), the partnership or seasonal employer (as applicable) may be eligible to receive additional funds in light of such guidance.
  • Although previous SBA guidance has directed that PPP Loans be disbursed in a single lump sum payment, the new SBA guidance has clarified that partnerships or seasonal employers may receive additional disbursements if they are eligible for additional PPP Loan funds pursuant to the newly released guidance described below.
  • We recommend that eligible applicants reach out to their banks to determine what procedures have been put in place to request an increase to the PPP Loan.
  • Partnerships: Pursuant to an interim final rule that became effective on April 20, the income of general active partners in a partnership may be reported as a payroll cost (up to $100,000 on an annualized basis) when preparing the partnership’s PPP Loan application. Such partners should not apply for PPP Loans as self-employed individuals with respect to their partnership income.
  • Seasonal Employers: Pursuant to an interim final rule that became effective on April 30, a seasonal employer may calculate its payroll costs for purposes of determining its loan amount eligibility by using any consecutive 12-week period between May 1, 2019 and September 15, 2019. Prior to this interim final rule, seasonal employers were required to use either (a) the 12-week period beginning February 15, 2019 or (b) the period beginning March 1, 2019 and ending June 30, 2019. Seasonal employers may still use the original periods, if they choose.