SBA Offers PPP Answers on Directors, Partnerships, and More

By Rebeca Romero Rainey

Dear Community Banker:

The Treasury Department and Small Business Administration just answered key ICBA questions about the Paycheck Protection Program relating to bank directors, partnerships, self-employed borrowers, and more. In a just-released interim final rule, the agencies clarified the following.

• Participating PPP lenders are not barred by existing SBA restrictions from lending to outside bank directors and shareholders that own less than 30 percent equity in the bank. It notes that lenders should comply with all other state and federal regulations concerning loans to associates.
• Officers and key employees of a PPP lender may not obtain a PPP loan from the lender in which they are associated but may borrow from a different PPP lender.
• Self-employed individuals should complete IRS Schedule C for 2019, line 31, to determine self-employment income for 2019, and use that amount both for computing the maximum loan amount and for computing the allowable salary/payroll costs that may be forgiven during the eight-week period following loan disbursement. For self-employed individuals that have employees, also include the gross wages and tips computed using 2019 IRS Form 941.
• Partners in a partnership should apply for PPP loans at the partnership level, not as self-employed individuals. Instead, self-employment income of active partners (up to $100,000 annualized) may be reported as a payroll cost by the partnership.
• Pledging 7(a) loans to a Federal Reserve Bank or Federal Home Loan Bank, among others, does not require the SBA’s prior written consent or a notice to the SBA.
• Businesses that are otherwise eligible for a PPP loan are not rendered ineligible due to receipt of legal gaming revenues if certain conditions are met.

ICBA is adding this latest information to its frequently asked questions on the PPP and other elements of the federal response to the COVID-19 outbreak. More information from Treasury and the SBA is available on their PPP FAQ document and the SBA's PPP landing page.

SBA is taking questions at [email protected]. However, the auto reply notes that SBA might not be able to provide an individual response due to the high volume of inquiries and cannot answer E-Tran or Capital Access Financial System questions via that email address. E-Tran assistance questions should continue to be directed to the hotline 833-572-0502 or [email protected].

Further, SBA has clarified that E-Tran users should choose “PPP” from the drop-down menu. Do not choose “7(a),” which will apply a set of requirements that aren’t relevant to PPP.

ICBA will continue keeping you informed of the very latest developments, and we sincerely thank you for everything you are doing to support local communities at this challenging time.