Jessica L. Jeane, J.D.
Director of Public Policy
March 3, 2021
The U.S. Small Business Administration (SBA) has released a new Paycheck Protection Program (PPP) Borrower Application Form for Schedule C Filers Using Gross Income. The new application released on March 3 reflects the updated interim final rule (IFR) released the same day, which allows individuals who file an IRS Form 1040, Schedule C to calculate their maximum loan amount using gross income. Additionally, the IFR implements other recent changes to the PPP announced by the Biden administration last week.
“Previously, PPP rules defined payroll costs for individuals who file an IRS Form 1040, Schedule C as payroll costs (if employees exist) plus net profits, which is net earnings from self-employment,” the IFR states. “SBA is aware of significant concerns with this definition, because it does not take into account fixed and other business expenses that a small business must cover to stay in operation and therefore keep the owner employed. Thus, the support for employment for sole proprietors includes covering business expenses as well as net profits.”
Therefore, “income” as used in the definition of payroll costs for sole proprietors and independent contractors may be construed broadly to include borrowers’ net income and borrowers’ gross income. “SBA has determined that changing the calculation for sole proprietors, independent contractors, and self-employed individuals will reduce barriers to accessing the PPP and expand funding among the smallest businesses,” according to the updated rules.
Note: The SBA clarifies that this change applies only to PPP loans that are approved after the effective date of this rule. “A borrower whose PPP loan has already been approved as of the effective date of this rule cannot increase its PPP loan amount based on the new calculation methodology.” In general, IFRs do not go through the ordinary regulatory process of proposing and finalizing regulations after a public comment period, and are thus immediately effective upon publication.
The application window for the PPP is scheduled to close this month on March 31.
IFR Docket Number SBA-2021-0010 - Business Loan Program Temporary Changes; Paycheck Protection Program – Revisions to Loan Amount Calculation and Eligibility
Paycheck Protection Program (PPP) Borrower Application Form for Schedule C Filers Using Gross Income
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