Paycheck Protection Program for Independent Contractors and Businesses Without Employees

Nusenda Federal Credit Union ("Nusenda") is participating in the U.S. Small Business Administration’s ("SBA") Paycheck Protection Loan program authorized under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. This document is based solely on Nusenda’s review of the CARES Act, the Paycheck Protection Program Flexibility Act of 2020 ("PPPFA"), the Interim Final Rule from the SBA, and guidance from the Department of Treasury* as of June 5, 2020, and is intended to aid prospective Borrowers in determining eligibility, loan amount, and preparing documentation necessary to apply. This summary is not intended to contain all terms and eligibility requirements of the program, and is not a commitment to make any loan by Nusenda. Given the changing nature of the guidance and Nusenda’s limited time to review new guidance as it is published, Nusenda makes no guarantee that this document is error-free. This document does not constitute legal advice, and you should consult your own attorney regarding any such advice.


All terms, conditions, and eligibility remain subject to change based on any additional guidance or regulation issued by the U.S. Small Business Administration ("SBA") and the U.S. Department of the Treasury.

* Visit the U.S. Department of the Treasury and U.S. Small Business Administration for more information on SBA’s assistance to small businesses.


Eligibility and Loan Amount

Eligibility:

  • You were in operation on or before Feb. 15, 2020;
  • You are an individual with self-employment income;
  • Your principal place of residence is in the United States; and
  • You filed, or will file, a Form 1040 Schedule C for 2019 (or a Form 1065 Schedule K-1 for partnerships).

Eligible Loan Amount (not to exceed $20,833 plus balance of eligible EIDL Loans):

Equal to the sum of:

  • 2.50 x [average monthly Self-Employment Earnings not to exceed $8,333 monthly or $100,000 annually]:
    • For businesses filing a Form 1040 Schedule C, use Line 31 to determine the annual amount.
    • For Partnerships filing a Form 1065, use Box 14.a of Form 1065 Schedule K-1 (reduced by any section 179 expense deductions, unreimbursed partnership expense claimed, and depletion claimed on oil and gas properties) multiplied by 0.9253 to determine the annual amount.

      Note: If this amount is zero or less, you are not eligible to apply for a PPP loan.
  • Plus: Outstanding balance on any SBA EIDL Loans (granted between Jan. 31, 2020 and Apr. 3, 2020) that you elect to refinance at the time of your Paycheck Protection Program loan funding.

Allowable Uses

Loan proceeds of the loan may be used for any of the following expenses:

  • Owner’s Compensation Replacement as calculated based on Self-Employment Earnings in the Eligible Loan Amount section above. The entire loan amount may be allocated to Self-Employment Earnings, which is eligible for forgiveness.
  • Interest expense* on mortgage debts incurred prior to Feb. 15, 2020.
  • Rent expense* on leases in effect prior to Feb. 15, 2020.
  • Utility expenses* for services beginning prior to Feb. 15, 2020.
  • Interest expense on other debts incurred prior to Feb. 15, 2020. Interest on other debts are not eligible for forgiveness.

* Note that you must have claimed, or be entitled to claim, a deduction for these expenses on your 2019 tax return in order for the expense to be eligible for forgiveness.

Borrowers must maintain records of all expenses for the Forgiveness Application.


Loan Terms

Below are the anticipated loan terms for PPP Loans:


Term Guidance

Loan Amount:

Eligible Loan Amount as defined above.

Interest Rate:

1.00% Fixed

Loans may be repaid at any time without prepayment penalty.

Fees:

N/A

Term:

60 months from date of Note.

Payments:

All amounts due for principal or interest shall be deferred until the amount of forgiveness has been determined and payment for the forgivable portion of the loan is remitted to Nusenda by the SBA. In no event shall payment deferrals exceed 20 months.


Notwithstanding the provision above, If Borrower does not submit a Loan Forgiveness Application within 10 months after the end of the covered period (approximately 15 months after the loan is disbursed), the entire loan balance will be deemed ineligible for forgiveness, and principal and interest payments shall commence on the sixteenth (16th) month after the note date.


Interest shall accrue during the deferred period, but shall not be capitalized. The SBA shall pay all accrued interest on the forgivable portion of the loan, and the Borrower shall be responsible for the payment of accrued interest on the portion of the loan that is not eligible for forgiveness.


Any balance that is not eligible for forgiveness shall be fully amortized and repaid in monthly installments of principal and interest based on the remaining term of the loan. Payments shall be established in such amount to amortize the accrued interest owed by the Borrower from the deferral period.

Guarantees:

SBA does not require recourse unless funds are misappropriated.

Collateral:

Unsecured



Applications Materials

Nusenda will require the following documentation to begin considering your application; however, as noted, additional information may be required based on additional guidance or regulation from the SBA.

  • 2019 filed federal tax return, or a copy of Form 1040 Schedule C or Form 1065 Schedule K-1 that you intend to file (if you have not, or do not intend to file, these forms for 2019, you are not eligible to apply for a PPP loan).
  • All Forms 1099-MISC (if applicable).
  • Organizational documents (if applicable), such as Articles of Organization filed with the State of New Mexico.
  • Operating Agreement or General or Limited Partnership Agreement (if applicable).
  • 2019 Financial Statements if tax return has not been filed.

For each individual or partner:

  • Copy of Driver’s License or Passport.
  • Social Security Number and Physical Address must be included on the application.

Debt Forgiveness

100% of the loan proceeds may be eligible for debt forgiveness by the SBA provided funds are used for allowable uses and generally were eligible for deduction on your 2019 tax return. Application for forgiveness will be processed after the loan proceeds are used and will require records of the expenses. Forgiveness is prohibited without adequate records of the use of funds.


Representations and Warranties

The SBA will require the Borrower to make the following representations writing on your application:

At Loan Application:

  • Certification that the uncertainty of the current economic conditions make the request for the Paycheck Protection Loan necessary to support ongoing operations.
  • Acknowledgement that the funds will be used to retain workers and maintain payroll, or pay other allowable expenses.
  • Attestation that another, duplicative loan application is not pending, and the Borrower has not received proceeds from another Paycheck Protection loan for duplicative purposes.

At Application for Debt Forgiveness:

  • Certification that the supporting documentation regarding use of funds is true and correct.
  • Certification that the amount of forgiveness requested was used to retain employees and/or pay other allowable expenses.