President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27, 2020, the largest economic stimulus package in this country’s history.
One of the provisions of the CARES Act is the Paycheck Protection Program (PPP), which currently authorizes up to $349 billion in forgivable loans to small businesses – those with 500 or fewer employees (there are a few exceptions), independent contractors, and the self-employed.
For small businesses and sole proprietorships, the loan application window opened on Friday, April 3, 2020; independent contractors and the self-employed were eligible to apply beginning Friday, April 10.
In the SBA’s first interim final rule, issued April 2, 2020, partnerships were instructed that each partner must apply for an individual loan under the self-employment guidance.
However, yesterday, April 14, 2020, the SBA issued a new interim final rule, reversing its stance on partnership loan guidance and instructing partnerships to file their loan applications as an entity, rather than requiring each of the partners to file an individual loan application separately. The April 14, 2020, guidance says “If you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized” per partner on the partnership PPP application.
What happens if you are a partnership and filed your PPP loan without considering the partners’ compensation and you have been funded by the SBA based upon the rules at the time of your application? Now that partners cannot file individual claims is the partnership allowed to go back and amend their PPP loan request to now take into consideration the partners’ compensation? What happens if by chance you are a partner and applied for a self-employment PPP loan and were funded? Do you have to return those loan proceeds ?
One regional bank representative told a partnership that they could not go back and amend their loan application to take into consideration the partners’ compensation! I hope and pray that this bank officer was just talking off the cuff, because I know there is no official guidance on this matter as yet.
In addition, the SBA notes that there will be “further” guidance for self-employed individuals in the days to come.
Read the new interim final rule issued on April 14, 2020, in full here.
If you have questions on the PPP and whether it might benefit your business, please click here to email us directly – we are here to help.
Until next Wednesday –