Tax and financial advice from the Silicon Valley expert.

File Schedule C and haven’t applied for a PPP loan? Now you can apply for a bigger loan

The Small Business Administration has issued new rules enabling small business owners who file Schedule C to apply for a bigger Paycheck Protection Program (PPP) loan, but only if they haven’t had a PPP loan approved before.

Under the new rules, the definition of payroll costs for the owner of the business is changed from net profit (net earnings from self-employment) to gross income (line 7 on Schedule C for 2020 or 2019.) The maximum annual compensation amount is still $100,000. For initial PPP loan applications, the maximum amount is $100,000 / 12 X 2.5 = $20,800. This amount also applies for cancellation of a PPP loan. Since many small businesses have little or no net profit, this is a big change.

The rules also expand eligibility for PPP loans to business owners who have non-financial fraud felony convictions in the last year, who have an arrest or conviction for a felony related to financial assistance fraud within the previous five years, or who are delinquent or in default on their federal student loans.

Unless Congress further extends the deadline to apply for a PPP loan, the deadline is March 31, 2021, so there is very little time to act, and lenders are scrambling to incorporate the new rules on their web sites. The American Institute of Public Accountants and other groups are urging Congress to extend the deadline because of the late change.

Business advisors also point out that it’s unfair that small businesses that already had their PPP loans approved can’t get additional funding under the new rules.

The SBA has issued new application Forms 2483-C and 2483-SD-C and updated application Forms 2483 and 2482-SD reflecting the new rules.

There is also a short window that started February 24, 2021 and ends March March 9, 2021 during which only businesses with fewer than 20 employees can apply for PPP loans.

If you are a small business owner who files Schedule C and you don’t have a PPP loan approved yet, (1) see your SBA lender and your CPA about applying for a PPP loan before March 31, 2021, and (2) contact your representatives in Congress to ask that the loan application deadline be extended beyond March 31, 2021. You must have been in operation on February 15, 2020 to qualify to apply for a PPP loan.

Fact Sheet about PPP loan increases.

SBA Interim Final Rule for these changes.

Updated SBA PPP loan FAQs.

Updated Form 2483 – PPP first-draw loan application

Updated Form 2483-SD PPP second-draw application

New Form 2483-C PPP first-draw application for borrower using Schedule C gross income

New Form 2483-SD-C PPP second-draw application for borrower using Schedule C gross income

Tax and financial advice from the Silicon Valley expert.