Independent Contractors Can Not be Counted on PPP Loans, Says SBA
Dalton, GA, April 6, 2020-The Small Business Administration (SBA) has drafted rules on the Payroll Protection Program (PPP) loans that were created in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, dictating that independent contractors, such as flooring installers, can not be counted on the payroll, reports the World Floor Covering Association (WFCA).
“The draft rules take a very strict interpretation of the CARES Act provisions regarding PPP loans and the forgiveness of those loans,” says the WFCA.
“Most significantly, the SBA’s rules exclude payments to independent contractors from a business’s payroll costs in calculating the loan amount. The CARES Act provides that the payroll cost is defined as the ‘sum of’ a list of costs ‘and’ the ‘sum of payments of any compensation to or income of a sole proprietor or independent contractor.’ The draft of the SBA regulations, however, states that independent contractors ‘do not count for purposes of a borrower’s PPP loan calculation.’ While it can be argued the SBA is incorrect based on the wording of the Act, SBA will be administering the loans and it is recommended that its interpretation be followed until this issue can be resolved.
“The SBA rules also limit how much of the loan can be forgiven. The CARES Act required that the amount forgiven could be reduced if the employer retained fewer employees than employed between February 25, 2019 and June 30, 2019 or, at the business’s election January 1, 2020 to February 29, 2020. The SBA rules, however, provide that ‘not more than 25 percent of the loan forgiveness amount may be attributable to non- payroll costs.’”