Borrowers who returned or repaid part of a first draw loan before Dec. 27, 2020
Among borrowers qualifying for PPP loan increases are those who repaid a portion of the first loan because they were unable to spend all the funds during the covered period. For this type of borrower to be eligible to receive an increase during this round of the PPP, they must have returned or repaid those funds by Dec. 27. In addition, the lender must have also reported by Dec. 27 that the borrower repaid the loan in part, and the SBA may not have remitted a forgiveness payment to the lender on the loan.
If all three conditions are met, the lender may go into E-Tran and approve a request, then disburse funds for an increase up to the difference between the amount retained by the borrower and the amount previously approved. The lender must report the corrected balance of the loan amount and the loan status on the next 1502 report submitted by the lender after re-disbursing the increase. If the SBA originally paid a processing fee based on the fully disbursed amount of the first draw loan, it will not pay additional processing fees for the re-disbursement.
Borrowers who did not accept the full amount for which they were eligible
In some cases, a borrower might have decided against accepting the full loan amount approved by during the PPP in 2020. If the full PPP loan amount was not accepted and disbursed before Dec. 27, 2020, and the SBA hasn’t remitted a forgiveness payment to the lender for the loan, the borrower may request a first draw increase of up to the amount previously approved. How the lender processes and reports this increase depends on how the original loan was reported:
-If the lender reported the original loan as a decrease of the loan amount in E-Tran when the borrower did not accept the full amount, the lender processes an increase on the original loan via E-Tran, then must disburse the increase within 10 calendar days of processing the increase and report it on the next 1502 report.
-If the lender reported the original loan as partially disbursed and never reported a decrease to E-Tran, the lender may make a disbursement up to the full amount approved in the system. It must report the disbursement and increase in the next 1502.
Partnerships that excluded partner compensation from their first loan request
Assuming the SBA has not remitted a forgiveness payment to the lender, if a partnership received a PPP loan earlier but 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 be eligible for an increase.
The lender of record would need to submit a request through E-Tran to increase the first draw loan amount to include appropriate partner compensation, even if it has already disbursed the full loan and even if it has already submitted the first 1502 report on the loan. SBA would pay the lender an additional processing fee for the increased amount. Other eligibility requirements, loan limits, and lender underwriting requirements apply, so lenders should review the SBA Procedural Notice. In addition, borrowers must provide the required documentation to support calculations of PPP loan increases that include the partner compensation.
Some seasonal employers
The Economic Aid Act revised how a seasonal employer could determine its maximum loan amount, and in some cases, it may result in the seasonal employer being eligible for more money. The new methodology allows seasonal employers to use the average total monthly payments for payroll for any 12-week period between Feb. 15, 2019, and Feb. 15, 2020, when calculating the maximum loan amount. Previously, seasonal employers had a narrower window from which to choose the 12-week period (between May 1, 2019 and September 15, 2019). If the lender has not already received a forgiveness payment for a seasonal employer with a first draw loan and using the revised methodology results in a higher loan amount, the seasonal employer may seek an increase.
Other PPP eligibility and lender underwriting requirements apply, and the borrower must provide the lender with documentation supporting the new calculation. Lenders are to submit such increases in E-Tran, according to the SBA’s Procedural Notice on First Draw Loan Increases, and the originating lender will be paid an additional processing fee based on the amount of the increase.
Some farmers and ranchers
The Economic Aid Act allows certain farmers and ranchers to change the way the maximum loan amount is calculated for PPP loans, even if they have already been disbursed – as long as the SBA has not already remitted a forgiveness payment to the lender. The new calculation allows the use of gross income from the IRS Form 1040 Schedule F, instead of net income, for farmers with no employees.
Other PPP eligibility and lender underwriting requirements apply, and the borrower must provide the lender with documentation supporting the new calculation. The increase would be submitted by the lender in E-Tran, and SBA would pay an additional processing fee for the increase to the originating lender.