Seasonal Businesses Receive Expanded PPP Loan Flexibility
A rule change released by the Treasury Department will allow seasonal businesses to choose a different 12-week expense period when applying for a Paycheck Protection Program (“PPP”) loan under the CARES Act — a period that more accurately reflects their seasonal operating payroll and increases their eligible loan amount.
The PPP is operated by the Small Business Administration and is intended to offer small businesses access to low-interest loans to cover payroll and other expenses. Significantly, eligible recipients may receive loan forgiveness for those allowed expenses incurred and paid over an eight-week period.
Under the CARES Act, the maximum loan amount for a seasonal business was calculated on an average payroll amount calculated over a 12-week period beginning on February 15, 2019, or at the election of the eligible recipient, the period beginning on March 1 and ending on June 30, 2019. However, some seasonal employers have peak seasons that occur later in the year and without the ability to use an alternative base period, many seasonal businesses found themselves eligible for only minimal PPP loan relief that was not commensurate with loan amounts available to winter and spring seasonal businesses.
Under Treasury’s interim final rule issued on April 24, 2020, seasonal employers including restaurants, lodging establishments, tourism companies and guiding operations, can now choose any consecutive 12-week base payroll period between May 1 and Sept. 15, 2019 to determine their PPP loan amount. Moreover, while the CARES Act requires that a business must have been in operation on February 15, 2020 to be eligible for a PPP loan, the interim rule recognizes that some seasonal businesses might have been dormant on that date. The rule therefore also establishes that a seasonal business will be considered to have been in operation as of February 15, 2020, if the business was in operation for any 8-week period between May 1, 2019 and September 15, 2019.
The Treasury Department has made this interim final rule effective immediately. The final day to apply for and receive a PPP loan remains June 30, 2020, or until the current tranche of PPP funds is exhausted which is anticipated to be sooner.