The SBA Issues Guidance on PPP Loans for Self-Employed Individuals

Last updated April 15, 2020

The Small Business Administration (the “SBA”) continues to issue piecemeal guidance regarding the Paycheck Protection Program (“PPP”). The SBA’s most recent guidance, an interim final rule (the “Rule”), discusses PPP loans as applied to self-employed individuals, and clarifies certain individuals and business eligible for PPP loans. The Rule can be found here.

Self-employed individuals are eligible for a PPP loan if (1) they were in operation on February 15, 2020; (2) had self-employment income: (3) principally reside in the United States; and (4) filed or will file a Form 1040 Schedule C for 2019. However, the Rule clarifies that partners in a partnership and members in an LLC (if the LLC has elected to be treated as a partnership for tax purposes) are ineligible to apply for PPP loans. The Rule instead states that “the self-employment income of general active partners” can be included as payroll costs on the partnership’s PPP loan application.

The Rule provides formulas for self-employed individuals, both with and without employees, to determine the maximum amount of their PPP loan. PPP loan proceeds can only be used for specified purposes, including “owner compensation replacement”, which is calculated based on the self-employed individuals’ net profit. Like PPP loans to small businesses, PPP loans to self-employed individuals are eligible for forgiveness if used for particular purposes, but at least 75% of the loan proceeds must be used for payroll costs.

CSG will continue to track any guidance that may be issued in connection with the Paycheck Protection Program and provide updates. If you have any questions regarding the Paycheck Protection Program or other federal and state economic assistance programs, please reach out to your CSG attorney.

For additional information pertaining to the coronavirus outbreak, please visit CSG’s COVID-19 Resource Center.

This publication contains general information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Attorney Advertising. Prior results do not guarantee a similar outcome.