The Small Business Administration (SBA) has issued two new Paycheck Protection Program (PPP) loan applications as well as an interim final rule that allows PPP loan applicants who file a Form 1040, Schedule C, Profit or Loss from Business, to calculate their PPP loan using gross income rather than net profit, as previous guidance had required. This change is likely to provide an opportunity for larger loans to sole proprietors that may record little net profit from their business.
The new loan application forms are as follows:
This IFR provides new guidance that updates the calculation for the maximum loan amount a Schedule C filer may receive. Under previous guidance, a Schedule C filer calculated their loan amount based on net profit (line 31 of Schedule C); however, under the updated guidance, a Schedule C filer may calculate their PPP loan based on gross income (line 7 of Schedule C). This provides a dramatic change to the amount of a PPP loan for which a Schedule C filer may qualify. However, under current guidance, this change is not retroactive to Schedule C filers who have already received a first-draw or second-draw PPP loan. The IFR provides guidance for Schedule C filers calculating their PPP loan for those that have employees and those that do not.
The IFR removes eligibility restrictions that have previously limited business owners with non-fraud felony convictions and delinquent on federal student loans from applying for PPP loans.
Various business organizations and trade associations have encouraged Congress to allow Schedule C filers who previously received a PPP loan prior to the release of this new guidance to request an increase in their prior loan. However, at this time, there has been no updated guidance released to address those situations.