Guidance issued for first-draw PPP loan increases, reapplications

The United States Small Business Administration (SBA) on Wednesday evening released procedural guidelines that detail the requirements for Paycheck Protection Program (PPP) borrowers to reapply for a PPP loan or request a raise. a PPP loan.

the notice of procedure Primarily applies to first-draw PPP loans approved before August 8, 2020, when the first iteration of the program stopped accepting applications. The guidelines do not apply to second-draw PPP loans (i.e. second PPP loans obtained by former PPP borrowers), which are not eligible for increases or re-application, nor to first-draw loans for which discounts have already been given by the SBA. .

The PPP, which reopened to community financial institutions (CFIs) earlier this week, open to for lender with $ 1 billion in assets or less on Friday and for all lender on January 19. AICPA leaders to discuss the latest developments in PPPs and their implications for CPAs and their small business clients during this week AICPA Town Hall at 3 p.m. ET on Thursday.

The Law on Economic Assistance to Small Businesses, Non-Profit Organizations and Badly Affected Institutions, PL 116-260, known as the Economic Aid Act, which kick-started the PPP with $ 284.5 billion in new funding, changed existing rules regarding increases in PPP loans to borrowers for the first time. Under 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 submitting the initial report. of the SBA 1502 form for the loan. Section 312 of the Economic Aid Act removes the restriction from Form 1502 and provides additional restricted circumstances under which an increase in PPP loans would be permitted.

These narrow circumstances have been described in the consolidated document provisional final rule (IFR) “Temporary Changes to the Business Loan Program; Paycheck Protection Program as Amended by the Economic Aid Act ”published on January 6. The SBA procedure notice released Wednesday evening provides guidance on procedures for reapplying or requesting an increase for a first-draw PPP loan.

Here 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 given a discount to the lender for the loan, although these borrowers may be eligible for a second draw PPP loan.
  • First-draw PPP loan increases can only be granted by the official lender of the loan, that is, the lender who is reflected in the SBA system as the current owner of the loan. If the loan was sold after it was granted, the lender who purchased the loan is the official lender.
  • Borrowers who have returned or paid off a first-draw PPP loan are eligible to reapply for that loan provided the lender has reported to the SBA by December 27 that the borrower has fully repaid the loan or canceled the loan. The borrower can then apply for a new first-draw PPP loan in an amount for which the borrower is eligible under current PPP rules.
  • Borrowers who have repaid or repaid part of a first-draw PPP loan can request a loan increase equal to the difference between the amount outstanding by the borrower and the amount previously approved. The lender can disburse these funds to the borrower as long as the lender has reported to the SBA by December 27 that the loan has been partially repaid. For example, if a borrower repaid $ 25,000 of a $ 100,000 PPP loan because the borrower was unable to spend the funds during the period covered, the lender may repay the borrower $ 25,000 at provided that the other conditions are met.
  • Borrowers who have not accepted by 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 request and disburse the funds, but must follow one of the two processes detailed in the notice depending on how they declared by December 27 that the borrower has not accepted the full amount. of the PPP loan.

Partnerships

If a partnership has received a first-draw PPP loan covering the salary costs of the partnership’s employees and other eligible expenses, but not including any amount for partner compensation, the lender can submit a claim. electronically through the SBA’s E-Tran Servicing site (E -Tran) to increase the loan amount to include appropriate partner compensation, even if the loan has been fully disbursed and the lender’s first Form 1502 report has already been submitted.

The amount of the increase cannot exceed the maximum amount of the loan to which the borrower is entitled under the PPP rules, and in any case the increase in the amount of the loan cannot exceed the maximum amount of the PPP loan (10 million dollars for an individual borrower or $ 20 million for a business). group). In addition, the borrower must provide the lender with all the documents required to support the calculation of the increase to include the partner’s compensation.

The lender must submit any increase request electronically in E-Tran no later than March 31st and subject to availability of funds.

Seasonal employers

Section 336 of the Economic Aid Act revised the method by which a seasonal employer can determine the maximum amount of their PPP loan. Seasonal employers are now allowed to use the average total monthly payroll payments for any 12-week period chosen by the employer between February 15, 2019 and February 15, 2020. Seasonal employers who have received a P3 Premier loan drawdowns may be eligible for a loan increase if applying the Section 336 methodology results in a higher loan amount being calculated.

In this scenario, the lender can electronically submit a request through E-Tran to increase the loan, provided that the loan does not exceed the applicable maximum PPP loan amounts.

Farmers and breeders

Article 313 of the Law on Economic Aid changed the calculation of the maximum loan amount for certain farmers and herders. If an eligible farmer or rancher has received a first draw PPP loan and would be eligible for a higher maximum loan amount according to the formula described in subsection B.4.d. of the Consolidated IFR, the official lender can electronically submit a request through E-Tran to increase the loan amount, again subject to the maximum loan amount and documentation requirements.

PPP financing, forms and advice

Accountants played a key role in helping small businesses secure the necessary financing during the first iteration of the PPP, which provided $ 525 billion in forgivable loans more than five months before stopping accepting applications in August. The $ 284.5 billion in new PPP funds includes reserves of $ 35 billion for initial loans and $ 15 billion for CFIs.

The SBA and the Treasury issued guidelines January 6 for the new PPP, which shares many of the same rules as the old PPP, but also has some important differences. Application forms for first– and second print ready were released a few days later.

Accounting firms can prepare and process PPP applications on the CPA business financing portal, created by AICPA, CPA.com and fintech partner Biz2Credit.

AICPA experts discuss the latest PPP programs and other small business support programs at a virtual town hall every two weeks. The webcasts, which provide CPE credits, are free to AICPA members. To go to the AICPA Town Hall Series web page for more information and to register.

the AICPA Paycheck Protection Program Resources Page houses resources and tools produced by the AICPA to help cope with the economic impact of the coronavirus.

For more information and stories on the coronavirus and how CPAs can handle the challenges of the outbreak, visit the JofAof coronavirus resource page or subscribe to our email alerts for the latest P3 news.

Jeff drew ([email protected]) is a JofA editor-in-chief.

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