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Sole Proprietors and Independent Contractors


The Paycheck Protection Program (PPP), the primary relief program for small businesses under the CARES Act, becomes available to sole proprietors and independent contractors on Friday, April 10. SBA lenders are supposed to begin accepting applications on that day.

Until now, those lenders were only able to accept PPP applications from businesses that have employees.  Those businesses were generally required to document the number of employees and their compensation during the preceding 12 months.

Of course, sole proprietors and independent contractors do not have employees. They should be prepared to document their net income during the preceding 12 months.

We’re still awaiting specific guidance from the Treasury Department or the SBA on the documentation that will be required and just how the application process will work, but federal tax returns will likely be involved.  Prospective borrowers should have that documentation at hand and be prepared to consult with their tax and financial advisors.

The SBA lender network has been greatly expanded, but lenders have already received unprecedented numbers of loan applications for this program.  Many are only accepting applications if the borrower has an existing relationship with the lender.  Prospective borrowers should reach out to their banks to see if they will be able to apply for this part of the Program and what the borrower can do to get ready to apply.

SBA Answers FAQs

On April 8, SBA published a document answering frequently asked questions, available here:

Among the FAQs:

  1. Question: What time period should borrowers use to determine their number of employees and payroll costs to calculate their maximum loan amounts?

Answer: In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. (Further details have been omitted here.)

  1. Question: Should payments that an eligible borrower made to an independent contractor or sole proprietor be included in calculations of the eligible borrower’s payroll costs?

Answer: No. Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

  1. Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period; when does that eight-week period begin?

Answer: The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.

You should consult with your legal and accounting professionals when considering applying for the Paycheck Protection Program.

This is not intended to be legal advice.  You should contact an attorney for advice regarding your specific situation.

Be sure to visit our Coronavirus Resource Page for more information.

Gary M. Schuster is partner at the firm and practices business, non-profit, and arts and entertainment law.  He can be reached at  866-303-9595 toll free or 845-764-9656 and by email.

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