COVID-19 Resource Center
April 7, 2021

SBA Changes PPP Loan Amount Eligibility for Sole Proprietors and Independent Contractors

In early March, the Small Business Administration (SBA) issued new Paycheck Protection Program (PPP) rules that allow Form 1040-Schedule C filers to calculate their maximum loan amount using gross income instead of net profit. 

Recognizing that sole proprietors, independent contractors, and self-employed individuals were not able to borrow “meaningful” amounts because their net income was nominal—especially during the Covid-19 shutdowns—the SBA now allows new filers to choose to calculate the “owner compensation” share of their payroll costs based on either net profit or gross income. 

The 32-page interim final rule and calculation changes are detailed in the SBA docket, “Business Loan Program Temporary Changes; Paycheck Protection Program — Revisions to Loan Amount Calculation and Eligibility.” There are additional calculation components for Schedule C filers with employees to avoid double-counting of any employee payroll costs. 

Additionally, a new borrower application, Form 248-C, is available for first-draw borrowers who choose to use the gross income calculation.

The SBA and Treasury have specified this change only applies to PPP loans approved after March 4, 2021. Loans that already had been approved cannot increase their loan amounts based on the new methodology.

SBA data shows that businesses with no employees are 70% owned by women and minorities, compared to 40% for businesses with employees.

The Paycheck Protection Program application process ends on May 31, 2021. All eligible entities can apply through a participating lender until then.

Additional PPP Resources:

If you are a sole proprietor, independent contractor, or self-employed, we are happy to discuss how the loan amount eligibility change may impact your Accounting, Bookkeeping, and/or Business Tax Planning.

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