Question 1: Recently, the SBA announced it will allow Schedule C filers to base the PPP Loan amount off of gross income. We have Schedule C Filers that would now like to change their loan amounts to account for the new calculation methods. What do we do if we have already submitted the Schedule C Filer’s application to SBA?
Answer: Depending on where the application/loan currently stands will determine the next steps the Lender may take.
- If the Lender has submitted the application to the SBA Platform and the application has not been approved, the Lender may withdraw the application from the SBA Platform and resubmit an application using the new loan application form based on gross income for the Schedule C Filer.
- If the Lender has submitted the application to the SBA Platform, the application has been approved (SBA has issued a loan number), but the loan has not been disbursed, the Lender may cancel the loan in E-Tran Servicing and the applicant may apply for a new loan using the new loan application form.
- If the Lender has submitted the application to the SBA Platform, the application has been approved, the loan has been disbursed, but the Lender has not filed the related Form 1502 Report, the Lender may cancel the loan in E-Tran Servicing. However, the applicant must repay the existing loan, and upon repayment, the applicant may apply for a new loan using the new loan application form.
- If the Lender has submitted the application to the SBA Platform, the application has been approved, the loan has been disbursed, and the Lender has filed the related Form 1502 Report, the Lender may not cancel the loan.
Please note that if the Lender wishes to cancel the loan, it must be canceled in E-Tran Servicing; upon cancellation, the SBA Platform will be updated. Lenders cannot enter a new loan application into the SBA Platform until the SBA Platform is updated with the prior application’s cancellation.
The new application form for Schedule C filers are now available, click here to download on the SBA website.
Question 2: Can a PPP Borrower use the Alternative Size Standard for a Second Draw PPP Loan if the PPP Borrower has more than 300 employees?
Answer: Based on the current guidance available, generally, the 300 employee cap applies to all second draw borrowers, regardless of the Alternative Size Standard. Specifically, the Economic Aid Act states, “The term ‘eligible entity – (I) means any business concern, nonprofit organization, housing cooperative, veterans organization, Tribal business concern, eligible self-employed individual, sole proprietor, independent contractors, or small agricultural cooperative that (aa) employs not more than 300 employees; and…” Thus, while a borrower may fit the Alternative Size Standard, if the borrower does not also meet the 300 employee cap, the borrower is not eligible to receive a second draw PPP loan. While this is the general rule, there are exceptions if the applicant is:
- Assigned a NAICS code beginning with 72 and employs no more than 300 employees per physical location; or
- A news organization that is majority owned or controlled by a business concern that is assigned NAICS code 511110 or beginning with 5151 and employs no more than 300 employees per physical location; or
- A nonprofit public broadcasting entity under NAICS code 511110 or 5151 and employs no more than 300 employees per physical location.
If your lending institution has any questions about PPP, please contact Your SBA Legal Department® at SBAQuestions@AJ-Law.com.
This article is provided for general information and educational purposes only. It does not solicit, establish, or continue an attorney-client relationship. The contents should not be construed as legal advice or opinion. If you have matters or questions to be resolved for which legal advice may be indicated, you are encouraged to contact a lawyer authorized to practice law in the state for which you are investigating and/or seeking legal advice. We understand that there are many specific scenarios that need to be considered with PPP loans. It is our intention to provide general facts related to guidance and encourage readers to reference SBA guidance to apply to each specific loan situation.
