Paycheck Protection Program & the Self-Employed

On March 3, 2021, the Small Business Administration (SBA) released an interim final rule (IFR), which provides an important change in the Paycheck Protection Program (PPP) loan calculation for sole proprietors, independent contractors, and self-employed individuals.

The new IFR allows a Schedule C filer who has yet to be approved for a PPP loan to elect to calculate the owner compensation share of its payroll costs based on either net profit (as reported on line 31 of Schedule C) or gross income (as reported on line 7 of Schedule C).

Borrowers who have already been approved for a PPP loan cannot increase their loan amount based on the new methodology. To mitigate the risk of fraud, a Schedule C filer that reports more than $150,000 gross income to calculate its PPP loan will not be able to claim the loan necessity safe harbor. The SBA will review a sample of the population of PPP loans made to Schedule C filers using the gross income calculation, if gross income exceeds the $150,000.

The IFR also expands eligibility and access to PPP loans for small business owners who are:

1. Delinquent on federal student loans, or
2. Have prior non-fraud felony convictions.

The SBA deadline to apply for PPP first or second draw loans remains at March 31, 2021.

If you have specific questions related to your business or PPP loan, please reach out to us. We would be happy to answer your questions and work with you on a strategy specific to your current business circumstances. Santora CPA Group’s professionals are here Right, By Your Side.

Santora CPA Group
Call us 302-737-6200