To Our Valued Clients and Associates,
Recently, the Biden administration announced its first changes to the PPP program, including a big change for Schedule C filers.
First, effective Wednesday February 24th and continuing for two weeks, the SBA has been directed to only accept PPP loan applications for businesses with fewer than 20 employees. The goal is to increase access for small businesses. 98% of small businesses have fewer than 20 employees but so far, they have only accounted for 45% of all PPP funding.
Second, the SBA has been directed to change how they calculate the PPP loans for self-employed workers including sole proprietors and independent contractors. Previously, for these Schedule C filers with no employees, their maximum loan was calculated based on their net profit from Schedule C, which for many filers resulted in a very small loan amount. To address this issue, the SBA will be revising the calculation, however, the new formula will not go into effect until the first week of March. The new calculation has not been made available to lenders yet, but the SBA has indicated it will now be based on gross income and not net profit. This marks a significant change to the calculation that will impact many Schedule C filers.
As always, we will advise you of any additional guidance as it becomes known. If you have any questions, please contact us directly.