April 28, 2020
By: Caity Witucki
Contributing Editor, Hot Topic Tuesday
Hot Topic Tuesday – Calculating the Maximum PPP Loan Amount for Different Types of Businesses
On Monday, the U.S. Department of Treasury released an Interim Final Rule authorizing all lenders eligible to originate loans under the Paycheck Protection Program (PPP) to use an alternative criterion for calculating the maximum loan amount for PPP loans issued to seasonal employers.
Prior to the new Rule, section 1102 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act only permited lenders to calculate a seasonal employer’s maximum loan amount by using their monthly average payments for payroll during a 12-week period beginning February 15, 2019 and ending on May 10, 2019 or (at the election of the borrower) between March 1, 2019, and June 30, 2019. However, it recently came to the attention of the U.S. Department of Treasury that some seasonal employers have seasons that occur later in the summer.
In response, the Interim Final Rule addresses the disparity in funding available for spring seasonal employers and summer seasonal employers by providing borrowers with the option of using any consecutive 12-week period between May 1, 2019 and September 15, 2019 for determining their maximum loan amount.
Treasury has determined that this alternative period for seasonal employers is consistent with the terms applicable to the PPP in general. “In section 1102, Congress gave seasonal employers the option to calculate their maximum loan amount using alternative base periods,” says the Interim Final Rule. “By permitting seasonal employers to calculate the maximum loan amount using any consecutive 12 weeks within a specified 4.5 month period, this Interim Final Rule ensures that seasonal employers affected by the pandemic are treated even-handedly.”
Other than this adjustment, the terms and requirements applicable to PPP loans under the Interim Final Rule remain identical to the terms and requirements in section 1102 of the CARES Act.
For guidance on calculating maximum loan amounts for other business types, the SBA and Department of Treasury has published a 7-page guide entitled How to Calculate Maximum Loan Amounts by Business Type. The guide is available to download here.