Breaking News: New PPP for the Self-Employed and Small Businesses

Two big deals.

Big Deal 1

To reserve Paycheck Protection Program (PPP) monies for you, the Small Business Administration (SBA) established a 14-day exclusive application period for small businesses with fewer than 20 employees.

The window closes on March 9 at 5:00 p.m. Eastern time, so if you are an S or C corporation with fewer than 20 employees, apply for your first, second, or upgrade PPP money now.

Also, don’t apply just to your bank. You may find your bank useless but start there anyway. And then apply to one of the online referrals such as Nav or Lendio, with which we and other members (subscribers) have had success. Take the money from the first lender willing to give it to you. Forget the laggards.

Big Deal 2

The SBA has created a new method and a new application for the Schedule C business that uses gross income rather than net profit to determine the money amount of the PPP. Using gross income rather than net income is a big deal for most Schedule C businesses as you can see in the following example.

Example. Sue is self-employed with no employees. Her gross income on line 7 of her Schedule C is $130,000. Her net income on line 31 is $72,000.

With the old method, she would have received approval for $15,000 of tax-free money ($72,000 ÷ 12 x 2.5).

With the new form available now, Sue uses the lesser of her gross income of $130,000 or the ceiling of $100,000 for the PPP application. She will receive $20,833 in tax-free money ($100,000 ÷ 12 x 2.5).

The new form gives Sue an extra $5,833 in tax-free money ($20,833 – $15,000).

The gross income method applies to new first-time and second-draw loans. Loans already approved may not be changed. Here are links to the new rules and forms:

  • New rules for the Schedule C taxpayer
  • New form for the first-time PPP
  • New form for the second-draw PPP

Partners

Partners are self-employed, but the SBA has nothing new to say about partners.

Updates

As you see, we updated this article on March 4, 2020. We continue on the lookout for additional SBA guidance on this matter.