The US Small Business Administration (SBA) issued procedural guidelines late on Wednesday that detail the requirements for borrowers in the Payment Check Protection Program (PPP) to re-apply for a PPP loan or to request a loan increase. of PPP.
The procedural notice applies primarily to PPP loans approved until August 8, 2020, when the first iteration of the program stopped accepting applications. The guidance does not apply to second drawing PPP loans (that is, second drawing PPP loans obtained by previous PPP borrowers), which are not eligible for increases or reapplications, or first drawing loans for which payments are made. of forgiveness have already been sent by the SBA.
The PPP, which reopened to community financial institutions (CFIs) earlier this week, will open to creditors with $ 1 billion or less in assets on Friday and to all creditors on January 19. AICPA executives will discuss the latest PPP developments and their implications for CPAs and their small business clients at this week’s AICPA Prefecture at 3 pm ET on Thursday.
The Small Business, Non-Profit and Local Economic Aid Act, PL 116-260, known as the Economic Aid Act, which restarted the PPP with $ 284.5 billion in new financing, changed the existing rules on loan increases of PPP made for first time borrowers. According to previous PPP rules, a PPP loan could not be increased unless the loan was made to a partnership or seasonal employer and the lender approved the increase before sending the initial SBA Form 1502 report for the loan. . Section 312 of the Economic Aid Act removes the restriction on Form 1502 and provides for additional restricted circumstances under which increased PPP loans would be permitted.
These restricted circumstances were described in the consolidated interim final rule (IFR) “Temporary changes to the commercial loan program; Paycheck protection program as amended by the Economic Aid Act ”, released on January 6. The SBA procedure notice released Wednesday night provides guidance on procedures for reapplying or requesting an increase for an initial PPP loan.
The following is an overview of these policies and procedures.
Requirements for reapplying for a PPP loan or requesting a loan increase
- Loan increases or reapplications are prohibited for PPP loans if the SBA has remitted a pardon payment to the lender for the loan, although such borrowers may be eligible for a second drawing PPP loan.
- Increases in initial PPP loans can be made only by the creditor registered for the loan, that is, the creditor who is reflected in the SBA system as the current owner of the loan. If the loan was sold after it originated, the lender who acquired the loan is the official lender.
- Borrowers who have returned or repaid a first-time PPP loan are eligible to apply for that loan again, provided that the lender informed the SBA before December 27 that the borrower had fully repaid the loan or canceled the loan. The borrower can then apply for a new first withdrawal PPP loan in an amount for which the borrower is eligible under current PPP rules.
- Borrowers who have returned or repaid part of a first-time PPP loan may request an increase in the loan equal to the difference between the amount unpaid by the borrower and the amount previously approved. The lender may disburse these funds to the borrower, provided that the lender has informed the SBA before December 27 that the loan has been partially repaid. For example, if a borrower has returned $ 25,000 of a $ 100,000 PPP loan because the borrower was unable to spend the funds during the covered period, the lender may disburse $ 25,000 back to the borrower, provided other conditions are met.
- Borrowers who have not accepted before December 27 the full amount of a first draw PPP loan for which they have been approved may request an increase in the loan up to the amount previously approved. Lenders can approve the application and disburse the funds, but must follow one of the two processes detailed in the notice based on how they reported before December 27 that the borrower did not accept the full amount of the PPP loan.
Partnerships
If a partnership received a first drawing PPP loan that covered the partnership employees’ payroll costs and other eligible expenses, but did not include any amount for partner compensation, the lender can electronically submit an application through the E-Tran website SBA Servicing (E-Tran) to increase the loan amount to include appropriate partner compensation, even if the loan has been fully disbursed and the first report on the lender’s Form 1502 has already been submitted.
The amount of the increase may not exceed the maximum amount of the loan to which the borrower is entitled under the PPP rules, and in no case may the amount of the increased loan exceed the maximum amount of the PPP loan ($ 10 million for a individual borrower or $ 20 million for a group company). In addition, the borrower must provide the lender with all necessary documentation to support the calculation of the increase to include the partner’s remuneration.
The lender must submit any request for increase electronically on E-Tran by March 31 and is subject to the availability of funds.
Seasonal employers
Section 336 of the Economic Aid Act revised the method by which a seasonal employer can determine its maximum PPP loan amount. Seasonal employers can now use the average total monthly payroll payments for any 12 week period that the employer selects between February 15, 2019 and February 15, 2020. Seasonal employers who received a first draw PPP loan can be eligible for a loan increase if application of the Section 336 methodology results in the calculation of a higher loan amount.
In this scenario, the lender can electronically submit a request through E-Tran to increase the loan, as long as it does not exceed the maximum applicable PPP loan amounts.
Farmers and ranchers
Section 313 of the Economic Aid Act changed the calculation of the maximum loan amount for certain farmers and ranchers. If an eligible farmer or rancher received a first withdrawal PPP loan and would be eligible for a higher maximum loan amount based on the formula described in subsection B.4.d. of the consolidated IFR, the registered lender can electronically submit a request through E-Tran to increase the loan amount, again subject to the loan maximum and documentation requirements.
PPP financing, forms and guidance
Accountants played a key role in helping small businesses secure the necessary financing during the first iteration of PPP, which provided $ 525 billion in forgivable loans for five months before it stopped accepting applications in August. The $ 284.5 billion in new PPP financing includes offsets of $ 35 billion for first loans and $ 15 billion for CFIs.
The SBA and the Treasury issued guidance on January 6 for the new PPP, which shares many of the same rules as the old PPP, but also has some significant differences. Application forms for first and second withdrawal loans were released a few days later.
Accounting firms can prepare and process PPP orders on the CPA Business Funding Portal, created by AICPA, CPA.com and fintech partner Biz2Credit.
AICPA experts discuss the latest news about PPP and other small business aid programs during a fortnightly virtual city hall. Webcasts, which provide CPE credit, are free of charge for AICPA members. I go to the AICPA Town Hall Series web page for more information and to register.
O AICPA paycheck protection features page it houses resources and tools produced by AICPA to help address the economic impact of coronavirus.
For more news and reports on coronavirus and how CPAs can deal with outbreak challenges, visit the JofAin coronavirus resource page or subscribe to our email alerts for the latest PPP news.
– Jeff Drew ([email protected]) it is a JofA senior editor.