New Rules Benefit Self-Employed Workers Applying for PPP Loans

Editor’s Note: Thank you for viewing this resource about the Paycheck Protection Program (PPP). This was a cornerstone for many organizations during the COVID-19 pandemic, but it’s important to stay current on the latest financial support options. Like PPP, the Employee Retention Credit (ERC) can be leveraged to bring your business significant financial relief.

We invite you to dive into our ERC content here. Need professional advice on maximizing your ERC benefits? Learn more about our Employee Retention Credit consulting services and then contact us.

The Small Business Administration on Wednesday released a new application and loan calculation formula for Paycheck Protection Program loans for self-employed workers.

The new application for self-employed workers and sole proprietors who file IRS Form 1040 Schedule C now allows for these applicants to apply for PPP loans based on their gross income from self-employment. Previously, Schedule C filers were required to use their net profit from self-employment.

The new calculation is important for millions of sole proprietors and self-employed workers in the U.S., as it will lead to larger forgivable loans through the program.

It is important to note that the change is not retroactive. The SBA and Treasury have ruled that borrowers whose PPP loans already have been approved cannot increase their loan amount based on the new methodology.

Additionally, to mitigate the risk of fraud, a Schedule C filer that reports more than $150,000 gross income to calculate its first-draw PPP loan will not be able to claim the safe harbor provided for borrowers that, together with their affiliates, received PPP loans of less than $2 million. The SBA said it is eliminating the loan necessity safe harbor for these borrowers because they may be more likely to have other available sources of liquidity to support their business’s operations than Schedule C filers with lower levels of gross income.

The calculation change is detailed in a 32-page interim final rule published late Wednesday afternoon by the SBA, which administers the PPP in partnership with Treasury. The SBA also released an updated set of frequently asked questions and six updated or new application forms.

How KatzAbosch Can Help

Each borrower has their own individual set of circumstances, and the answers are not always clear. If you have questions about our PPP consulting services, please reach out to your KatzAbosch representative.