Pandemic Darlings The pandemic economy, in original documents
Home Source documents SBA Adjusts PPP Payroll Calculation For Form 1040, Schedule C Filers (ABA Banking Journal)

SBA Adjusts PPP Payroll Calculation For Form 1040, Schedule C Filers (ABA Banking Journal)

Summary

This ABA Banking Journal article reports that the Small Business Administration issued an interim final rule allowing individuals who file IRS Form 1040, Schedule C to calculate their maximum Paycheck Protection Program loan amount using gross income. Previously these filers used payroll costs plus net profits, which the article says effectively excluded many sole proprietors, particularly those with little or negative net profit. The change applies only to loans approved after the rule's effective date; borrowers already approved cannot increase their loans. Businesses using gross income for a first-draw loan get a safe harbor presumption on the certification of economic necessity only if they reported $150,000 or less in gross income; larger reported gross income draws additional SBA review. It also removes restrictions tied to certain felonies and to student loan delinquency.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

SBA Adjusts PPP Payroll Calculation For Form 1040, Schedule C Filers

The Small Business Administration has just issued an interim final rule implementing recent changes to the Paycheck Protection Program. The IFR allows individuals who file an IRS Form 1040, Schedule C to calculate their maximum loan amount using gross income. SBA has issued updated forms for borrowers and lenders reflecting these changes and step-by-step loan amount calculations.

Previously, PPP rules defined payroll costs for individuals who file Form 1040, Schedule C as payroll costs (if employees exist) plus net profits, which is net earnings from self-employment. This formula effectively excluded many sole proprietors from obtaining PPP loans, particularly those with very little or negative net profit.

The IFR also stated that this calculation change will apply only to loans approved after the rule’s effective date. Borrowers that have already had their loans approved cannot increase their PPP loan amount based on the new maximum loan formula.

Additionally, businesses electing to use gross income to calculate their first-draw PPP Loan will only have a safe harbor presumption of making the necessary certification of economic necessity if they reported $150,000 or less in gross income on their Schedule C being used to apply for a first-draw PPP loan. Borrowers with reported gross income greater than $150,000 will be subject to additional SBA review.

Finally, the IFR removes a restriction on business at least 20% owned by an individual who was arrested for or convicted of a felony related to financial assistance fraud in the previous five years or any other felony within the previous year from obtaining PPP loans. It also removes a restriction on businesses at least 20% owned by an individual who is delinquent on student loan from receiving PPP loans.

Access the new first draw application form . Access the new second draw application form . Access the first draw Schedule C gross income form . Access the second draw Schedule C gross income form . Access the lender first draw form . Access the lender second draw form .

Tags: Commercial lending Coronavirus COVID-19 SBA Paycheck Protection Program Small business Small business lending

File and source

File
e08-r59.html
Size
152,947 bytes
SHA-256
991426ece94d4dcb25c3575757e2b62c62ef80c1a42995dffe82bad246d18d6c
Our copy
e08-r59.html
Original
bankingjournal.aba.com
Back to top