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How to increase PPP Loan

PPP loan increases, reapplications open January 19, 2021

If you received a first-draw PPP loan approved by Aug. 8, 2020 that has not been forgiven, you may be able to amend your original application to request a PPP loan increase.

Borrowers can amend their original application to request increased loan amounts due to changes in PPP loan rules listed below if the original loan amount was less than amount for which they would have otherwise applied. Increased loan amounts may not exceed the maximum PPP loan amount ($10 million for an individual borrower or $20 million for a corporate group).

Borrowers may NOT amend their original loan applications for errors and omissions except for what is noted below:

You may be eligible for an increased PPP loan amount under the following SBA rules changes:

  • 05/19/20 Seasonal Employers Rule Update. If a seasonal employer received a loan before the alternative criterion for such employers was posted on April 28, 2020, and would be eligible for a higher maximum loan amount under the alternative criterion, the lender may electronically submit a request an increase to the PPP loan amount
  • 05/19/20 Partnership Rule Update. If a partnership received a 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 borrower may request an increase to the loan amount to include appropriate partner compensation
  • Amend your initial application to include expenses for insurance costs for group life, dental, vision, and disability insurance which were included in the new Act.
  • 4.05/22/20 Rule Update for Tipped Employees: The Interim Final Rule posted on 05/22 allows borrowers to factor tips paid by customers to employees into their calculation of payroll costs.
  • Farmers and Ranchers: Recent legislation and guidance provides a new calculation of maximum loan amount. If a farmer or rancher received a first-draw PPP loan and would be eligible for a higher maximum loan amount based on the formula described in subsection B.4.d. of the SBA consolidated IFR, the lender of record may electronically submit a request through E-Tran to increase the loan amount, again subject to the loan maximum and documentation requirements.

In addition, SBA guidance provides that the following borrowers can reapply or request an increase for their original first round loan:

  • Borrowers who returned all of their initial PPP loan amount. Borrowers that returned or repaid a first-draw PPP loan are eligible to reapply for that loan provided the lender reported to the SBA before Dec. 27 that the borrower had fully repaid the loan or canceled the loan. The borrower may then apply for a new first-draw PPP loan in an amount the borrower is eligible for under current PPP rules.
  • Borrowers who returned part of their initial PPP loan amount. Borrowers that returned or repaid part of a first-draw PPP loan may request a loan increase equal to the difference between the amount not paid back by the borrower and the amount previously approved. The lender may disburse those funds to the borrower provided that the lender reported to the SBA before Dec. 27 that the loan had been partially repaid. For example, if a borrower returned $25,000 of a $100,000 PPP loan because the borrower could not spend the funds during the covered period, the lender can disburse $25,000 back to the borrower provided other conditions are met.
  • Borrowers who did not accept the full amount of their initial PPP loan. Borrowers that did not accept before Dec. 27 the full amount of a first-draw PPP loan for which they were approved may apply for an increase in the loan up to the amount previously approved. Lenders may approve the request and disburse the funds but must follow one of two processes detailed in the notice based on how they reported before Dec. 27 that the borrower did not accept the full amount of the PPP loan.

How to Request a First-Draw PPP Loan Increase or reapplication

Contact your Lender.

Increases to first-draw PPP loans can be made only by the lender of record for the loan, i.e., the lender that is reflected in the SBA’s system as the current owner of the loan. If the loan was sold after it was originated, the lender that purchased the loan is the lender of record.

SBA Guidance now provides that a borrower’s lender of record may submit an electronic request through the SBA’s E-Tran Servicing site to increase the PPP loan amount. The borrower will be required to provide the lender with documentation to support the calculation of the increase.   Contact your original loan lender for details. The SBA will begin accepting original loan increase and reapplication requests on January 19, 2021.

Requests must be submitted by March 31, 2021 but should be made as soon as possible as this is a first-come, first-serve program and funds are likely to run out unless Congress acts to replenish.

Important Note:

Loan increases or reapplications are prohibited for PPP loans if the SBA has remitted a forgiveness payment to the lender for the loan, though such borrowers may be eligible for a second-draw PPP loan.

Conclusion

This information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors. 

For the most part, the changes included in this legislation apply to all PPP loans except those already forgiven. In addition, the way the legislation is written, most provisions take effect immediately after the legislation is enacted, as if they were in the CARES Act that was passed March 27, 2020.

Questions? 

Contact your Warady & Davis advisor or our PPP team at 847-267-9600; info@waradydavis.com. You can also visit the Warady & Davis LLP COVID-19 Resource Center for a wealth of information on stimulus assistance, new legislation and much more.  This information is updated regularly.

SOURCE: SBA, U.S. Treasury, IRS and AICPA
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