Is Your Business Eligible for More PPP Loan Funds?

Is Your Business Eligible for More PPP Loan Funds?

Is Your Business Eligible for More PPP Loan Funds?

Partnerships and seasonal employers may not have received the full amount of Paycheck Protection Program funds for which they are eligible, and may apply for additional funds, according to a new rule issued by the SBA.  

But they will need to act quickly.

Please note, the material contained in this article is for informational purposes only, is general in nature, and should not be relied upon or construed as a legal opinion or legal advice. 

Who’s eligible for more funds?

There are two groups who may be able to apply for additional funds from the PPP — partnerships and seasonal employers.

Partnerships: Are you eligible?

If your business has partners whose compensation wasn’t accounted for in your payroll estimate when applying for the PPP, you may be eligible for more funds. 

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The guidance for applying for PPP for the self-employed released on April 14 may be the root of some of the confusion around whether a partner’s wages could be eligible as a payroll expense for PPP. It stated: 

“if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. 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.” 

As a result, some partnerships may have applied for and received a PPP loan without requesting compensation for partners. The SBA is now saying those applicants may request those funds from their lender: 

“If a partnership received a PPP loan that only included amounts necessary for payroll costs of the partnership’s employees and other eligible operating expenses, but did not include any amount for partner compensation, the lender may electronically submit a request through SBA’s E-Tran Servicing site to increase the PPP loan amount to include appropriate partner compensation, even if the loan has been fully disbursed, provided that the lender’s first SBA Form 1502 report to SBA on the PPP loan has not been submitted…” (More on this in a moment.)  

Borrowers who want to apply for more funds should keep in mind that: 

  • 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 (see question #4 in How to Calculate Maximum Loan Amounts);
  • Documentation supporting the increase must be submitted (check with your lender on what will be needed); 
  • Loans are still limited to a maximum of $10 million for an individual borrower or $20 million for a corporate group. 

Seasonal Businesses: Are you eligible?

Similarly, seasonal businesses received additional guidance on April 28, 2020, when the Treasury posted an interim final rule for seasonal employers, giving them an alternative method for calculating their maximum PPP loan amount. 

Since that was fairly late in the PPP game, some employers received a PPP loan before the alternative method was released and may have qualified for additional funds under the later guidance. As a result, seasonal employers may apply for an increase with their lender based on the April 28, 2020 guidance, provided they meet the other criteria.

What to Do to Get Additional Funds

The benefit of this guidance to business owners may be extremely limited. This guidance indicates these requests must be submitted to SBA’s E-Tran Servicing site by the lender before the lender’s first SBA Form 1502 report to SBA on the PPP loan has been submitted. It goes on to state: 

“After the initial SBA Form 1502 report on the PPP loan has been submitted to SBA, or after the date the first SBA Form 1502 was required to be submitted to SBA, the loan cannot be increased.”

The SBA Form 1502 is a form that the lender must submit monthly to the SBA reporting on 7(a) loan activity. (The PPP program falls under the SBA 7(a) program.) It must be submitted within 20 calendar days after a PPP loan is approved or, for loans approved before availability of the updated SBA Form 1502 reporting process, by May 22, 2020.

So there may be a very limited window of opportunity for borrowers to reapply. If you believe you qualify for an increased amount, contact your lender right away. 

In addition, it may have left out whole groups of other borrowers who didn’t understand the confusing guidance released in dribs and drabs. Other borrowers who realized they applied for the wrong amount and don’t know what to do. For example, Dawn wrote in a comment on the Nav blog

I am a sole proprietor. I applied for PPP on 4/09 and was approved and got the money on 4/16. I did not know at that time I could apply for my wages. If I apply for a second loan for my own wages will it be denied?

This guidance did not address other types of businesses that applied for PPP and did not include owner’s compensation in their calculation. They deserve the opportunity to get the funding they need as much as anyone else, though without SBA guidance on issues like these, lenders will likely be unable to help borrowers get additional funds.

Keep in mind lenders are still flooded with customer calls on applications that haven’t been fully processed or are pending approval for PPP funds. Contacting your lender to get additional funds may take a lot of persistence as they have limited resources for addressing customers’ PPP questions. That doesn’t mean it isn’t worth the effort, but be aware it may take persistence to get the job done.

This article was originally written on May 15, 2020.

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ABOUT AUTHOR

Gerri Detweiler

Education Director for Nav

Credit expert Gerri Detweiler is Education Director for Nav. She has more than three decades of experience in consumer credit education, has been interviewed in more than 3500 news stories, and answered over 10,000 credit questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.

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2 responses to “Is Your Business Eligible for More PPP Loan Funds?

  1. Hi there dear sba team,about 2 month ago i apply for small loan for small business,in which i successfully got it,i miss judge the amount that i was going to need for my business,is it possible im eligible for a small amount $5000 more,sincerely Jose santana,thank you for your time.