New Rules Benefit Self-Employed Workers Applying for PPP Loans

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 your situation, please reach out to your KatzAbosch representative or contact us by clicking here.

To learn more about our Paycheck Protection Program services, click here.

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