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New PPP Loan Rules for Sole Proprietors

The Small Business Administration (SBA) released new Paycheck Protection Program (PPP) rules allowing self employed individuals (sole proprietors) who file Form 1040, Schedule C, Profit or Loss From Business, to calculate their maximum PPP loan amount using gross income instead of net profit. The change is detailed in a 32-page interim rule published by the SBA, titled “Business Loan Program Temporary Changes: Paycheck Protection Program—Revisions to Loan Amount Calculation and Eligibility.”

ppp loan sole proprietors

PPP Loans for Sole Proprietors

Under the new guidance, Schedule C filers who have no been approved for a first or second-draw PPP loan may calculate the owner compensation portion of its payroll costs based on either gross income (as reported on line 7 of Schedule C) or net profit (as reported on line 31 of Schedule C).

It’s important to note this change is not retroactive. Schedule C borrowers who have had their loans approved already cannot go back and increase their loan amount based on this new calculation.

Calculating Owner Compensation

Schedule C filers who have employees can calculate the owner compensation portion of their payroll costs based on either gross income or net profit minus expenses reported on lines 26 (wages (less employment credits)), 19 (profit-sharing and pension plans), and 14 (employee benefit programs) of Schedule C. Schedule C filers with no employees can choose to calculate their loan amount simply based on either gross income or net profit.

In addition to the interim final rule, the SBA also issued an updated list of frequently asked questions and the following new or updated application forms:

  • Updated first-draw (Form 2483) and second-draw (Form 2483-SD) PPP borrower application forms
  • New first-draw (Form 2483-C) and second-draw (Form 2483-SD-C) PPP borrower application forms for Schedule C filers using gross income
  • Revised lender application form for loan guaranty (Form 2484)
  • Revised second-draw lender PPP application (Form 2484-SD)

Contact Us for Assistance

If you need assistance applying for a first or second-draw PPP loan, applying for loan forgiveness, or would like us to review your PPP loan application form, we’re happy to help. Please call 443-320-4101 or email info@hoffmancpas.com to speak with a Hoffman Group representative.

Author: Megan O’Donnell

This entry was posted on Thursday, March 4th, 2021 at 10:47 am. Both comments and pings are currently closed.

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