On March 3, SBA released the latest guidance, benefitting specifically Schedule C filers (NOT S corps or partnerships). Here it is, in a nutshell:
Schedule C filers may apply for PPP loans based on gross income or net income
For 1st or 2nd draw loans after 3/3/2021
If no employees, the max loan amount is based on no more than $100,000 gross income.
Calculation is gross (or net) income/12 months x 2.5 months...not to exceed $20,833 ($29K with NAICS code 72)
Apply based on either 2019 filed tax returns or 2020 IRS Form Schedule C (with solid numbers/NOT estimates)
If your gross income exceeds $150,000, you must be ready to prove economic necessity. This requires applicants to apply in good faith "that the uncertainty of current economic conditions makes necessary the loan request..."
Removed restrictions that prevent business owners who have non-financial fraud felony convictions in the last year as well as those who are delinquent or in default on their federal student loans from obtaining PPP loans
Why the change? Under prior rules, many Schedule C borrowers may have received very small PPP loans. SBA (and the greater CPA community) is aware that net income doesn't account for fixed and other business expenses. So glad for this realization!
Have additional questions? Please contact us to discuss how we can help.
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