The SBA has issued a new Paycheck Protection Program (PPP) Borrower Application for sole proprietors and other Schedule C filers. These applicants can now base the loan amount on their 2019 or 2020 Schedule C gross receipts, not to exceed $100 thousand. Generally, the maximum loan amount you can receive, assuming you have no employees, is $20,833. If you have an NAICS code of 72, the maximum is $29,167.
The SBA also issued the Interim Final Rule (IFR), Business Loan Program Temporary Changes; Paycheck Protection Program – Revisions to Loan Amount Calculation and Eligibility, to update existing guidance and account for the changes for Schedule C filers.
Key Points in the SBA’s Interim Final Rule
The IFR allows Schedule C filers to choose either gross receipts or net profits to calculate the loan amount. If you choose to use gross receipts for a first draw PPP loan, and your gross receipts exceed $150 thousand, you are not automatically deemed to have met the requirement to certify that the loan was necessary. In this case, your certification can be subject to SBA review.
According to the IFR, Schedule C filers can choose a covered period of anywhere between 8 and 24 weeks for forgiveness; however, if you choose anything less than 2.5 months, the forgiveness amount is prorated.
The IFR explains the new application process is for new borrowers only, so Schedule C filers who have already been approved for a PPP loan cannot reapply to receive an increased amount.
For both first and second draw PPP loans, the IFR eliminates the restriction on borrowers with non-financial fraud felony convictions in the last year and removes the restriction for owners of borrowers who are delinquent or in default on student loans.
Additional PPP Resources & Information
The SBA added new questions and updated wording to their PPP FAQ Document to incorporate the changes made to the program by legislation enacted in December. Among other things, the FAQ now addresses the automatic certification of need for PPP2 loans.
As with the initial PPP, first draw PPP2 loans less than $2 million are automatically deemed to certify. First draw and second draw loans won’t be consolidated for purposes of determining the $2 million threshold. Second draw loans are automatically deemed to certify because borrowers have to submit proof of a 25% reduction in gross receipts.
ARB’s PPP Services Group Is Here to Help
ARB’s PPP Services Group members have been hand-picked, based on knowledge, training, and experience, to deliver sound advice and recommendations. Contact me today to talk about your PPP advisory needs.
For more information on this topic and many other COVID-related matters, visit our COVID-19 Financial Resource and Tax Center.
And check out ARB’s other recent PPP insights:
by Holly Ferguson, CPA
Holly Ferguson joined ARB in 1996 and has been a principal for the firm since 2012. Throughout her career, Holly has provided financial reporting consulting services, assisted with transactional accounting and consulting related to business acquisitions/sales, and analyzed implications and strategic implementation of new accounting standards. As the Practice Leader of ARB’s Accounting & Attest Services Team, she focuses primarily on related services for businesses, manufacturers, credit unions, and nonprofit organizations.