With many self-employed individuals and independent contractors applying for Paycheck Protection Program loans, the Small Business Administration (SBA) has issued an interim final rule today, April 15th, that clarifies eligibility and application procedures for these individuals.
Specifically, the additional guidance clarifies that self-employed individuals who filed Schedule C with their federal income taxes and were operating on Feb. 15, 2020, are eligible for PPP loans, except for partners in a partnership.
For partners in a partnership, the partnership is the eligible entity, and the rule provides direction for calculating the self-employment income of general active partners as payroll cost. The new rule states that the self-employment income of partners in a partnership may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership. Individual partners may not submit a separate PPP loan application as a self-employed individual.
For other self-employed individuals, the rule provides applicants with clear-cut direction on how to calculate their maximum loan amount, depending on whether they have employees or not. Advice is also provided on how loan forgiveness will be calculated.
The SBA stated it will issue additional guidance for those individuals with self-employment income who: (1) were not in operation in 2019 but who were in operation on Feb. 15, 2020, and (2) will file a Form 1040 Schedule C for 2020.
Lastly, the SBA in conjunction with the Treasury Department, also issued three new FAQs which pertains to lenders and the SBAs Standards of Conduct Committee. The SBA will continue to periodically update the Payback Protection Loans FAQs which can be found here.