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On March 3, 2021, the U.S. Small Business Administration issued new Paycheck Protection Program rules, including revisions to PPP loan amount calculations and eligibility changes in an effort to expand funding among small businesses. The SBA also released an updated set of frequently asked questions.
These changes noted above relate to both First Draw and Second Draw PPP loans.
Loan formula changes are for sole proprietors, independent contractors, and self-employed individuals. The calculation changes came about because many Schedule C borrowers may have received very small PPP loans to support their own employment due to having small net profits.
Loan amount calculation changes are related to all loans approved after March 3, 2021, and are not retroactive. A borrower whose PPP loan has already been approved cannot increase their loan amount based on the new methodology.
If you have no employees, your maximum loan amount is based on 2019 or 2020 IRS Form 1040, Schedule C.
For First Draw PPP loan borrowers, owner compensation can’t exceed $20,833. For Second Draw loan borrowers, owner compensation can’t exceed $20,833 or 29,167 if NAICS code 72.
If you want to use 2020 numbers to calculate payroll costs and have not yet filed a 2020 tax return, fill it out and compute the value.
If a self-employed borrower has employees, the maximum loan amount is based on 2019 or 2020 IRS Form 1040, Schedule C.
The SBA also released new PPP loan application forms for Schedule C filers using gross income:
The last day to apply for and receive a PPP loan is March 31, 2021.
If you have any questions or comments please feel free to reach out to our team.