A new ruling regarding the Payment Protection Program (PPP) has been released by the Small Business Administration regarding calculation of the loan. To break it down, The World Floor Covering Association has issued the following guidance:
“There has been much confusion over the Paycheck Protection Program (PPP) regarding what is included and not included in calculating the amount of a PPP loan. The Small Business Administration (SBA) issued rules on how to calculate the loan amount for LLCs, sole proprietors and the self-employed.
Owners of partnerships were left confused on whether to include their compensation in the loan application since they pay taxes as self-employed or to apply for a separate PPP loan. The SBA published an interim final rule advising that if you are “a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual.” Rather, the partners compensation should be “reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.”
The rule came after many partnerships had applied for a PPP loan, which did not include any compensation to the partners. To clear up the confusion, the SBA issued a new interim final rule providing that if a partnership received a PPP loan that did not include any amount for partner compensation, the lender may electronically submit a request to increase the PPP loan amount to include appropriate partner compensation (up to the $100,000 annualized limit).
The increase is allowed 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. The increase should be requested electronically through SBA’s E-Tran Servicing site, along with the required documentation to support the calculation of the increase.
Notice: The information contained in this update is abridged from legislation, court decisions, and administrative rulings, and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.”