Turns out the SBA is now giving seasonal businesses a significant choice in how their maximum loan amount will be computed.

Seasonal businesses received additional guidance from the Small Business Administration on applying their special rules for payroll protection program loans in a new set of interim final rules on the program, the fifth such set of rules.[1] A key addition is a new provision that allows the use of any 12-week period between May 1, 2019 and September 15, 2019 to calculate the maximum loan amount for a seasonal business.

As the rule description notes:

In this rulemaking, Treasury is addressing the needs of certain potential borrowers that are seasonal employers by allowing seasonal employers to use an alternative base period for purposes of calculating the loan amount for which they are eligible under the PPP. Section 1102 of the Act permits seasonal employers to calculate their maximum loan amount by using their monthly average payments for payroll during “the 12-week period beginning February 15, 2019, or at the election of the eligible [borrower], March 1, 2019, and ending June 30, 2019.” Some seasonal employers, however, have seasons that occur later in the year. Without the ability to use an alternative base period, many summer seasonal businesses would be unable to obtain funding on terms commensurate with those available to winter and spring seasonal businesses. This interim final rule addresses that disparity and ensures consistency in program administration by providing a seasonal employer the option of using any consecutive 12-week period between May 1, 2019 and September 15, 2019 for determining its maximum loan amount.

Question 3 provides the specific rule:

3. How does this rule affect the calculation of the maximum loan amount for seasonal employers?

Under section 1102 of the CARES Act, a seasonal employer may determine its maximum loan amount for purposes of the PPP by reference to the employer’ average total monthly payments for payroll “the 12-week period beginning February 15, 2019, or at the election of the eligible [borrower], March 1, 2019, and ending June 30, 2019.” Under this interim final rule issued pursuant to section 1109 of the Act, a seasonal employer may alternatively elect to determine its maximum loan amount as the average total monthly payments for payroll during any consecutive 12-week period between May 1, 2019 and September 15, 2019.

The rule also recognizes that a seasonal business may very well have been dormant on February 15, 2020, providing in question 4:

4. If a seasonal business was dormant or not fully operating as of February 15, 2020, is it still eligible?

Yes, in evaluating eligibility, 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. This approach aligns with guidance previously provided by the Small Business Administration concerning other seasonal businesses under section 1102. See Treasury, Paycheck Protection Program Loans: Frequently Asked Questions (FAQs), FAQ 9 (posted April 6, 2020).

Question 6[2] reminds all parties that all other PPP rules apply to these loans.

6. Are any other SBA rules or guidance for the PPP affected by Treasury’s interim final rule?

No. This interim final rule only provides certain employers with an alternative means of calculating the maximum loan amount. All other terms and conditions in the PPP remain unchanged. All PPP applicants, borrowers, and lenders should continue to use existing SBA forms and follow all requirements set forth in the CARES Act and SBA regulations, except for the alternative approach described above for calculating the maximum loan amount.

The IFR concludes by noting that all lenders authorized to participate in the PPP program are authorized to issue loans under this guidance in Question 7.

[1] RIN 1505-AC67, “Small Business Administration Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Criterion for Seasonal Employer,” April 27, 2020, https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Additional-Criterion-for-Seasonal-Employers.pdf (retrieved April 27, 2020)

[2] It is likely a drafting accident, but he guidance skips from question 4 to question 6. A corrected version of the IFR may very well renumber questions after 4 to get rid of the skipped number 5.