Last Updated: May 20 at 8:01 p.m. 

See questions specific to independent contractors

GENERAL QUESTIONS

Is there a credit score requirement for Paycheck Protection Program loans?

No. A borrower’s ability to repay the Paycheck Protection Program loan is not a factor in eligibility consideration.

How do I determine the amount of the loan to request?

The maximum Paycheck Protection Program loan amount that a borrower can obtain is the lesser of 2.5 times the average monthly payroll costs that the borrower had in 2019 or $10 million dollars. When calculating payroll costs, individual salaries are capped at $100,000 (prorated per month). For business entities not operating in 2019, average monthly payroll costs would be based on January and February 2020. A borrower is limited to one Paycheck Protection Program loan.

What costs can be paid with a Paycheck Protection Program loan?

A Paycheck Protection Program loan can be used to pay the following business expenses of a borrower:

  • Payroll costs, including benefits
  • Mortgage interest for mortgages originated before February 15, 2020
  • Rent for leases in place before February 15, 2020
  • Utilities for service agreements that began before February 15, 2020.

The mortgage interest, rent, and utility costs would need to be business expenses (not personal expenses) of the borrower to qualify.

Should payments that an applicant (brokerage company) made to an independent contractor be included in calculations of payroll costs?

No. Any amounts that an applicant, in this case, a broker or the owner of a brokerage, has paid to an independent contractor should be excluded from the applicant’s payroll costs. However, an independent contractor is eligible to apply for a Paycheck Protection Program loan and may receive Paycheck Protection Program funds to cover his lost income, if the independent contractor satisfies the applicable requirements.

Does receiving a Paycheck Protection Program loan affect your credit?

Possibly. In the event that a Paycheck Protection Program loan does not qualify for 100% forgiveness, failure to make timely payments as required could impact the borrower’s credit. Additionally, the loan will be considered an extension of credit until forgiven or paid.

Must I repay the non-forgiven loan amount by June 30, 2020?

No. In the event that a loan does not qualify for 100% forgiveness, you would not have to pay any amount back by June 30, 2020. You will be subject to the following loan terms:

  • 2-year maturity, with all payments deferred for the first six months (though interest will accrue over this time period)
  • 1% fixed interest rate
  • No prepayment penalties or fees.

Do I need a business checking account to apply?

Maybe. Lenders are setting up their own processes and requirements for applications. Under the CARES Act/SBA guidelines, the applicant must submit SBA Form 2483 and payroll documentation as necessary to establish eligibility (i.e. payroll processor records, payroll tax filings, Form 1099s, or income and expenses from a sole proprietorship). Borrowers that do not have any such documentation must provide other supporting documentation, such as bank records, to demonstrate the qualifying payroll amount.

My S corporation is only a few months old. Am I eligible?

Your S corporation is eligible for a Paycheck Protection Program loan if it was in operation on February 15, 2020, and had employees to whom it paid salaries and payroll taxes. Only the portion of your compensation paid through payroll will be used when determining the maximum loan amount. Any reduction in your shareholder distributions are not recoverable under the program.

Is it true that applicants are put at the front of the line based on their financial history with the lender or a long-standing relationship with the bank?

Due to the high volume of loan applications under the Paycheck Protection Program, some lenders are prioritizing applicants that have an existing business relationship with the lender. The SBA is then processing the loan applications received from lenders on a first-come, first-serve basis, at least until the $349 billion funding limit is reached.

Is Wells Fargo able to lend under this program?

Wells Fargo can now lend under the Paycheck Protection Program based on action taken by the Federal Reserve on April 8.

When submitting a Paycheck Protection Program application, all borrowers must certify in good faith that that the PPP loan was necessary to support their ongoing operations. How will the SBA review this certification?

Borrowers receiving a principal loan of less than $2 million from the PPP program will simply be deemed to have made the required certification in good faith. Therefore, the SBA will not review certifications for these loans.

For borrowers that do not qualify for this safe harbor, the SBA will review whether the borrower had an adequate basis for making the required good-faith certification based on their individual circumstances. If the SBA determines that a borrower lacked such basis, the SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, the SBA will not pursue administrative enforcement or referrals to other agencies with respect to the borrower’s certification.

Why does the information I read about the Paycheck Protection Program seem to keep changing?

Lawmakers and government officials continue to consider changes to the PPP program that would provide borrowers seeking loan forgiveness with more flexibility and time to spend the money. Texas REALTORS® staff will continue to review any new guidance and legislation concerning the PPP program and will update the FAQs as needed.

QUESTIONS FOR INDEPENDENT CONTRACTORS

How do I calculate the maximum loan amount that I can obtain under the Paycheck Protection Program?

The maximum loan amount that an independent contractor can obtain under the Paycheck Protection Program is the 2.5 times the average monthly net profit that the independent contractor had in 2019. In determining average monthly net profit, the net profit for 2019 is capped at $100,000.

Maximum loan for an independent contractor = (amount in line 31 of Form 1040 Schedule C for 2019, capped at $100,000) / 12 x 2.5

If I haven’t yet filed my 2019 tax return, am I still eligible for a loan under the Paycheck Protection Program?

Yes. However, you will be required to complete and provide your Form 1040 Schedule C for 2019 with your loan application to substantiate the requested amount.

What will I need to submit with my Paycheck Protection Plan loan application to show my income?

Regardless of whether you have filed a 2019 tax return with the IRS, you must provide the Form 1040 Schedule C for 2019 with your Paycheck Protection Plan loan application to substantiate the requested amount and a 1099-MISC for 2019 detailing nonemployee compensation received (box 7), invoice, bank statement, or book of record that establishes you are self-employed. You must provide a 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020.

As an independent contractor, how much of the Paycheck Protection Program funds can I pay myself as compensation if I want to qualify for 100% loan forgiveness?

For purposes of loan forgiveness, the maximum amount of the Paycheck Protection Program funds that the lender will recognize as payroll costs for an individual operating as independent contractor is eight weeks’ worth of 2019 net profit (capped at $100,000), minus any paid leave received under the Families First Coronavirus Relief Act (FFCRA).

Forgivable payroll costs for an independent contractor = [(amount in line 31 of Form 1040 Schedule C for 2019, capped at $100,000) / 52 x 8] – (paid leave credits claimed under FFCRA)

Remaining funds will only be forgiven if the funds are used for other allowed business expenses (mortgage interest, rent, and utilities) and the independent contractor claimed (or will claim) deductions for such expenses on Form 1040 Schedule C for 2019.

As an independent contractor, what documents will my lender need to approve my request for loan forgiveness?

In requesting loan forgiveness, all borrowers are required to submit the PPP Loan Forgiveness Calculation Form and the PPP Schedule A, which you can find here. Additionally, for eligible nonpayroll costs, the lender will need documents that verify the existence of the eligible obligations/services prior to February 15, 2020, (such as lender amortization schedule, current lease agreement, and utility invoices from February 2020) and of any related payments made during the forgiveness period (such as cancelled checks or account statements covering the forgiveness period). For independent contractors, the lender will generally use the Form 1040 Schedule C for 2019 that the borrower provided with the loan application to determine the amount of funds that will be forgiven as payroll costs. Borrowers are encouraged to reach out to their lender to ask whether any additional documentation or records will be needed for forgiveness. The lender must make a decision on forgiveness within 60 days of a borrower’s request.

I have an LLC but don’t pay myself a salary. Is my LLC eligible to apply for a loan so that I can get paid?

Yes—provided the LLC is not being taxed as a corporation, the LLC is eligible to apply for a Paycheck Protection Program loan that covers your earnings. Average monthly payroll costs used to calculate the Paycheck Protection Program loan amount will be based solely on your self-employment earnings in 2019 (max $100,000) if the LLC does not have any U.S. employees or additional owners. An LLC being taxed as a corporation that does not have a payroll may consider applying for an Economic Injury Disaster Loan (EIDL).

I am an agent, not a broker—am I eligible for a Paycheck Protection Program loan?

Yes, if an agent operates as an independent contractor, the agent may individually file for a Paycheck Protection Program loan. Alternatively, if the agent has formed a company for the agent’s real estate business (whereby the agent’s commission is paid to the company), the agent’s company is eligible to file for a Paycheck Protection Program loan.

Do independent contractors have to have a payroll to apply?

No. For the purposes of a Paycheck Protection Program loan, the payroll costs of an individual operating as an independent contractor would be based on net earnings shown on Form 1040 Schedule C for 2019 (max $100,000).

Am I eligible to apply for a loan if I have no track record of commissions because I’m a new agent?

Not unless you had net earnings in 2019. The loan amount that an independent contractor is eligible for under the Paycheck Protection Program is based on the independent contractor’s Form 1040 Schedule C for 2019.

I have heard that I am not eligible for a loan because I am paid commission as an independent contractor, not a salary or hourly wage as an employee.

This is not true. Independent contractors who had net earnings in 2019 are eligible to apply for a Paycheck Protection Program loan. A business cannot include independent contractors in its payroll amounts for its loan.

As an independent contractor, are there restrictions on how I spend the compensation that I pay myself under the Paycheck Protection Program?

No. Loan forgiveness will depend on how much compensation the independent contractor pays themselves, not how it is spent.