The Small Business Administration (SBA) announced on May 13 that lenders can increase Paycheck Protection Program (PPP) loans for partnerships to cover partner compensation. The move addresses situations in which partnerships were granted loan amounts smaller than what they were qualified to receive.
Previously, an April 14 interim rule stated that partners in partnerships could not apply for a separate PPP loan for themselves as self-employed individuals. Instead, “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.”
This interim rule was meant to fill in the gap for partner compensation that was previously denied altogether. However, some partnerships applied for loans before the rule was issued—denying them crucial funding.
Partnerships can now electronically submit a request to increase a PPP loan to include appropriate partner compensation. This can be done even if the loan has been fully disbursed, despite the program rule that loans must be made in a single payment.
The partnership and the loan must meet the following criteria to be eligible for a loan increase:
- The lender’s first SBA Form 1502 report to SBA on the loan has not been submitted.
- The increased loan amount doesn’t exceed $10 million for an individual borrower or $20 million for a corporate group. (This is in line with the initial PPP rules.)
It’s important to contact your CPA if you might be eligible for a PPP loan increase. Our team has been tracking this issue closely and can help you determine whether you should make this request.
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