Almost a year into the program, the SBA continues to make changes to the PPP program.
The new change revises the maximum loan calculations for sole proprietors who file Schedule C returns. The good news is the loan amount is now based on gross income instead of the net profit which will allow businesses with little to no profit to get a loan based on their income before most expenses. The bad news is that this change is not retroactive - so if you already applied or received a loan you can't reapply.
*Here are the details:*
The new rules allow a Schedule C filer *who has yet to be approved for a PPP first- or second-draw 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).*
If a Schedule C filer has employees, the borrower may elect to calculate the owner compensation share of its payroll costs based on either net profit or gross income minus expenses reported on lines 14 (employee benefit programs), 19 (pension and profit-sharing plans), and 26 (wages (fewer employment credits)) of Schedule C. If a Schedule C filer *has no employees*, the borrower may simply choose to calculate its loan amount based on either net profit or gross income.
*Note that this 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.
There are specific applications for Schedule C filers attached.
*Currently the SBA is only accepting applications for small businesses (less than 20 employees) through March 9*. The final date for applications is March 31. If you are planning to apply for a PPP loan and have not applied yet, please check with your lender on their cutoff date. We have seen banks that are cutting off applications earlier than March 31. Bank of America is cutting off all applications on March 9 to give them time to process all applications.