How to Increase Amount of or Reapply for a First Draw PPP Loan
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, more commonly known as the Economic Aid Act, changed existing rules for the U.S. Small Business Administration’s initial Paycheck Protection Program (PPP) loans to increase the amount of a First Draw PPP Loan.
Under previous rules, a First Draw PPP Loan could not be increased unless the loan was made to a partnership or seasonal employer and the lender approved the increase before the lender submitted the initial SBA Form 1502 report for the loan.
The Economic Aid Act provides for additional narrow circumstances under which certain eligible borrowers that received a First Draw PPP Loan may reapply for a First Draw PPP Loan or request an increase in a First Draw PPP Loan that was approved on or before August 8, 2020.
- If your business didn’t apply for or secure a loan during the U.S. Small Business Administration’s initial Paycheck Protection Program (PPP) round in 2020, you can still apply for a First Draw Loan, even with the program reopening January 11, 2021. Click here for more information.
- If your business previously received a PPP loan during the initial phase in 2020 and meets certain eligibility requirements, click here to learn how you can apply for an additional PPP loan – which is referred to as Second Draw Loan.
If you need assistance to identify if you are eligible for an increase and/or help with completing your application, please contact us by clicking here.
Here are a few things to note:
- Partnerships: If a partnership received a First Draw 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, and the SBA has not remitted a forgiveness payment to the lender on that loan, the lender may electronically submit a request through the SBA’s E-Tran Servicing site to increase the First Draw PPP Loan amount to include appropriate partner compensation, even if the loan has been fully disbursed and even if the lender’s first 1502 report to the SBA on the First Draw PPP Loan has already been submitted.
- Seasonal Employers: The Economic Aid Act revised the method by which a seasonal employer may determine its maximum loan amount for purposes of the PPP to allow the seasonal employer to use the average total monthly payments for payroll for any 12-week period selected by the seasonal employer beginning February 15, 2019, and ending February 15, 2020.
If a seasonal employer received a First Draw PPP Loan and the SBA has not remitted a forgiveness payment to the lender on that loan, the seasonal employer would be eligible for an increase if , using Economic Aid Act calculations, results in a calculation of a higher loan amount. In that case, the lender may electronically submit a request through E-Tran to increase the seasonal employer’s First Draw PPP Loan amount, even if the loan has been fully disbursed and even if the lender’s first 1502 report to SBA on the PPP loan has already been submitted. The borrower must provide the lender with all required documentation to support the calculation of the increase due to the newly selected 12-week period.
Whether a partnership or seasonal employer, the amount of the increase may not exceed the maximum loan amount to which the borrower is entitled under PPP rules, and in no event can the increased loan amount exceed the maximum PPP loan amount ($10 million for an individual borrower or $20 million for a corporate group).
Other PPP Borrowers Eligible for a PPP Loan Increase (or Reapplication)
- Borrowers that fully repaid a First Draw PPP Loan before December 27, 2020. If an eligible borrower received a First Draw PPP Loan; the lender reported to the SBA before December 27, 2020, that the borrower fully repaid the loan; and the SBA has not remitted a forgiveness payment to the lender on that loan, the borrower may reapply for a new First Draw PPP Loan in an amount for which the borrower is eligible under current PPP rules. Lenders may approve such a reapplication if the borrower is eligible for a First Draw Loan under current PPP rules. The reapplication procedure depends on whether the Lender reported the loan to SBA as “cancelled” or “paid in full” as a result of the borrower’s repayment before December 27, 2020. The reapplication procedure applies only to those loans reported as “cancelled” or “paid in full” by the lender because the borrower returned the full amount of the original loan amount prior to December 27, 2020.
- Borrowers that returned part of a First Draw PPP Loan before December 27, 2020: If a borrower returned (or repaid) part of a First Draw PPP Loan; the lender reported to the SBA before December 27, 2020, that the borrower repaid the loan in part; and the SBA has not remitted a forgiveness payment to the lender, the lender may approve a borrower’s request for a loan increase and re-disburse funds equal to the difference between the amount retained by the borrower and the amount previously approved.
- Borrowers that did not accept the full amount of a First Draw PPP Loan for which they were approved. If a borrower did not accept before December 27, 2020, the full amount of a First Draw PPP Loan for which it was approved and the SBA has not remitted a forgiveness payment to the lender on that loan, the borrower may request an increase and the lender may approve and disburse a loan increase in the amount of the First Draw PPP Loan up to the amount previously approved.
Lenders must submit any requests for an increase electronically to the SBA on or before March 31, 2021. All requests are subject to the availability of funds.
Ericksen Krentel continues to monitor the ever-changing guidance and requirements for the PPP loan application process to assist you in receiving the maximum benefits allowable. Our team is ready to help create a customized approach for your organization to effectively, and correctly, apply for a PPP loan
If you are interested in applying for a PPP loan and need assistance, please contact us by clicking here.
As questions or concerns arise, we ask that you contact us so we can address them as quickly as possible to ensure we continue to meet your needs. As a reminder, you can always monitor our COVID-19 Updates webpage by clicking here for the latest or monitoring our accounts on LinkedIn, Twitter or Facebook.
About Ericksen Krentel
Ericksen Krentel CPAs and Consultants, founded in New Orleans, Louisiana in 1960 with offices in New Orleans and Mandeville, believes that serving as the clients’ most trusted adviser is grounded in going beyond the numbers.
That includes helping clients achieve their business and personal financial goals by providing innovative and exceptional services in the following areas: audit and assurance services, tax compliance and planning, outsourced CFO services and business valuations for a variety of industries; employee benefit plan audits; fraud and forensic accounting; business planning; IT consulting; loss calculations; and estate planning.
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