Will You Get an Increase in Your PPP Loan Amount?

Maryland’s Senator Cardin (D) introduced a bill titled “PPP Flexibility for Farmers, Ranchers, and the Self-Employed Act” yesterday.

The bill’s goal is to allow self-employed owners (whether farmers and not) to get an increase in a PPP loan amount due to various reasons.  Here is an overview of those reasons:

• General partners in a farm partnership will now qualify for getting a loan based on gross income.  The bill indicates that you must be a general partner to use this method.  If you structured your farm operation as an LLC with limited partners that are not paying SE tax on their share of the income, they would still receive no additional funds.
• Many husband-wife LLCs are structured where one spouse is the “general” partner and the other spouse is a “limited” partner.  In this case, the general partner could qualify for a full PPP loan, but the limited partner would not qualify for any PPP loan amount.
• If the farm partnership has no employees, there is a limit on the number of partners that will qualify for PPP loans.  The limit is $100,000 of gross income per partner with a maximum of $500,000 of income qualifying for PPP loans.  Therefore, the maximum PPP loan that a general farm partnership with NO employees could receive is about $104,000 (5 times $20,833).  The loan is at the partnership level, not at the partner level.
• Borrowers who have had their loans forgiven would be eligible to ask their lender to update the loan to the new amounts based on these new rules.  The borrower would then have a simplified method of indicating they have “spent” the funds.  This allows all borrowers to take advantage of the new rules even if their loan has already been forgiven.
• The bill allows the borrower to use any 2020 90-day contiguous period to determine if their gross receipts declined by more than 25% compared to the same 2019 90-day period.  Instead of being locked into a strict 1st, 2nd, 3rd, or 4th quarter, you can now pick one of 275 different 90 day periods (what happens with a period including February 29, 2020).  This would allow more flexibility to qualify for a second-draw loan, but the paperwork burden on the client and the bank may increase.

Will this pass?  Hard to tell.  There is only about 40 days left before the PPP program expires and it appears that the appetite for the PPP loan program in Congress is waning.  We will keep you posted.