By Thomas Cole, CPA, MST & Member of the Firm
The US Treasury issued new rules on March 3, 2021, which increase PPP loan funds available to sole proprietors. Both first and second draw PPP loans can be based on the sole proprietor’s gross income for 2019 or 2020 (as listed on Schedule C). The bad news, at this point, is that this new loan calculation method cannot be applied to previously approved loans.
The maximum gross income considered under these new rules is $100,000.
For a sole proprietor with no employees, this makes the maximum available PPP loan $20,833. (The loan can be larger for sole proprietors with W-2 employees). This change is a major improvement for small sole proprietors because PPP loan fund calculations were previously based on net income (instead of gross), resulting in a smaller maximum loan.
For borrowers with a gross income listed on Schedule C at $150,000 or less, the statutorily required certification concerning the loan request's necessity is granted automatically. If gross income is over $150,000, the borrower’s application may be subject to review by the SBA of its necessity certification.
The new rules remove the eligibility restriction that prevents business owners with non-financial fraud felony convictions in the last year from obtaining PPP loans. The eligibility restriction was also removed for owners who are delinquent or in default on their Federal student loans from obtaining PPP loans.
Have questions on how this will impact you? Contact us - we're here to help.
Thomas Cole is a Member of the Firm and licensed Certified Public Accountant in Florida and New Jersey and has more than 33 years of public accounting experience. Tom services clients in the construction, retail, real estate, and professional service industries, providing these companies and their owners with accounting, tax, and management consulting support. Tom is a member of the American Institute of Certified Public Accountants, the Florida Institute of Certified Public Accountants, and the New Jersey Society of Certified Public Accountants.