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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

May 14, 2020

COVID-19: Partners Get a Second Bite at the Apple on PPP Loans

Since the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, continuous guidance published by the Small Business Administration (SBA) has made it difficult for borrowers to ensure they’re receiving the maximum loan amount they’re entitled to under the Paycheck Protection Program (PPP). Recognizing this, the SBA is giving partnerships a second bite at the apple.

The Interim Final Rule posted by the SBA on May 13 states that if a partnership received a PPP loan that didn’t include any compensation for its partners, the loan amount can be increased to include partner compensation. As stated in the Interim Final Rule posted on April 14, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership. Those borrowers who applied for PPP loans prior to this guidance may have missed their opportunity to include this income in their initial loan calculation.

To receive the increase, borrowers should contact their lender directly and provide the lender with the required documentation to support the calculation increase. The lender will then submit a request to the SBA to increase the PPP loan amount to include partner compensation as long as the lender’s first SBA Form 1502 report to the SBA on the PPP loan hasn’t been submitted. The loan increase is available to partnerships even if the loan has been fully disbursed, notwithstanding previous guidance to the contrary.

However, borrowers need to be mindful that in no event can the increased loan amount exceed the maximum loan amount allowed, which is $10 million for an individual borrower or $20 million for a corporate group.

If you have any questions regarding the content of this alert, please contact Roger Cominsky, Financial Institutions & Lending Practice Area chair, at rcominsky@barclaydamon.com; Danielle Katz, associate, at dkatz@barclaydamon.com; or Samantha Podlas, associate, at spodlas@barclaydamon.com.

We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. Please contact Yvonne Hennessey, COVID-19 Response Team leader, at yhennessey@barclaydamon.com or any member of the COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.

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