New PPP Rules – Will Schedule C Filers Be Able To Reapply and Get PPP Loan Increase?
Schedule C filers that are applying for PPP loans for the first time are able to get a higher PPP loan amount based on the new PPP loan formula for Schedule C filers. Will independent contractors, self-employed, sole proprietors who already got a PPP loan approved be able to reapply and get these additional PPP loan funds?
This video is intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc. are providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience. Freedomtax Accounting and Multiservices Inc. or its members cannot be held liable for any use or misuse of this content.
Hello from Freedomtax Accounting. We are an accounting firm where we have been providing quality tax and accounting services for over 20 years. Today is the morning of March 5, 2021. And we wanted to do this video because there’s a lot of confusion on if you got PPP 1 or PPP 2 as a Schedule C filer that you at this time are not able to get an increase of your already approved PPP loan with the new PPP loan formula for Schedule C.
The confusion comes where the SBA released guidance, we are going to show the guidance where it says that right now, you cannot get that PPP loan increased but on the SBA website there is information that we are also going to show you in this video that when people read it they say, “Oh, so the SBA website says that yes, I can reapply as a Schedule C to ask for an increase.” We are going to show you that that is not what the SBA website says.
So there’s a lot of confusion because we posted a video yesterday basically informing the public that if you are a Schedule C filer and you got a PPP loan 1 or a PPP loan 2 already approved, that at this time you are not able to get that loan increased with the new formula. That if you don’t know what we are talking about, the old formula is use a Line 31 net profit of the Schedule C to calculate your PPP loan amount but now, you are able to use Line 7, which is your gross income, meaning that if you apply now for a new PPP loan 1 or a new PPP loan 2, you are going to get a higher amount.
So, other people were angry and I understand. But I really feel that you are going to get a chance to reapply. But today, March 5th at 8:55 AM, Orlando, Florida time because this is how fast things can change with PPP, you’re not able to get an increase on your already approved PPP 1 or PPP 2.
Now in this video, I’m going to do three things. We are going to talk about facts, what the facts are today. After the facts, I am – we are going to provide a prediction on what we think is going to happen. And number three, we are going to talk about what you as a business owner should be doing or what our recommendation on what to do based on the facts that are available today, right now. OK?
So once again, we are going to talk about facts. We are going to give you our prediction and we are going to maybe let you know what to do if you are small business owners to get help. OK?
So here are the facts. Let’s start with that. The facts are that this week, the week of – the first week of March 2021, the SBA released the following, and we are going to show you. The SBA released a new PPP 1 loan application form for the Schedule C filers where if you file a Schedule C and now you can use your 2019 Schedule C or your 2020 Schedule C and you have not received a PPP 1, you can apply for the PPP loan with the new formula. See right here that it says you can use Line 7, meaning that you are going to be able to get a higher PPP loan amount compared to all the other Schedule C filers that had applied in the past and got their PPP loan approved with their Schedule C.
This opens up the door to a lot of people who were not eligible in the past especially if your Line 31 net profit of the Schedule C was too low or even had a loss on Line 31. You were not able to apply. So now, you can apply because you are going to use Line 7 which is your gross income. So that’s the first fact. SBA released this new PPP 1 application form for Schedule C filers who have not – that are going to apply for the first time for PPP 1.
Second fact. The SBA released another new PPP loan application form for the second draw, meaning that you if you are a Schedule C filer and you got a PPP 1 approved with the old formula and now you are eligible because you still have to meet the at least 25% reduction in revenue requirement to be able to apply for PPP 2 as a Schedule C. So if you got a PPP 1 already and have not received a PPP 2 as a Schedule C filer, you are now going to be able to apply for PPP 2 with the new formula. See? This is the application form for the second draw for Schedule C filers using gross income, meaning Line 7. OK.
Third fact. The SBA released an interim final rule late Wednesday night of this week where they provide details and guidance on how the new formula for Schedule C filers is going to work, which this is good. Why? Because the banks even though the news about the new formula was released by the White House last week, last week of February 2021, the banks were not implementing the new formula because most banks were waiting on official SBA guidance. So this week, first week of March, Wednesday night, the SBA releases the interim final rule. So now, the banks or any lender had the official rules from the SBA on how to implement the new PPP loan formula for Schedule C filers.
Another fact. When you read this interim final rule, if you scroll down to page 7, you will see that and I’m going to put it very big so you can read it where we clearly that it says that, implementing this change, the change in the formula for loans that have been approved, this is only – that this rule is only an option for PPP loans that are approved after the effective date of this rule, meaning now March. And it also says that if you received, if you already have a PPP loan that has already been approved as of the effective date of this rule cannot increase its PPP loan amount based on new calculation methodology.
What is this saying? This is saying that right now, today, March 5th, 9:02 AM, if you’re a Schedule C filer, you got a PPP loan 1 or 2 approved, at this time, you cannot get an increased for the PPP loan you already got using the old formula. OK?
Now, where is the confusion? And this is another fact. If you go to the SBA website and you go to go the first draw PPP loan landing page, you will see that there is a section that says, “Reapplying and loan increases” and that is true, because a lot of people were commenting in our video yesterday the SBA website says that you can reapply to get a loan increase, and that is true.
Look. If you go to that section that says “Reapplying and loan increases” and by the way, this section right now is only available in the PPP 1 landing page at this time. It is not an option for PPP 2. OK?
So let’s read what’s on the SBA website. It says, “For existing PPP borrowers that did not receive loan forgiveness by December 27, 2020, you may reapply for a first PPP loan if they previously returned some or all of their first draw PPP loan funds or under certain circumstances request to modify their first PPP loan amount if they previously did not accept the full amount for which it is eligible.”
Now, the important thing is, that you can reapply for a PPP 1 loan increase if you meet certain circumstances today. Now, what are those certain circumstances? Another fact that SBA released in January, this Procedural Note where it details and this was released on January 13th, and that is important, the date and I’m going to tell you why that’s important a little bit further in this video in our prediction section of this video.
So the SBA in January, this is the guide to the borrowers and the lenders on how if they meet specific circumstances, they can reapply to get a PPP loan increase. And I’m going to put a link to all these documents in the description below so you can print them out or read them yourself, right?
So, this is the way that if you got a PPP 1, you can ask for – you can reapply for an increase. And if you read it, you have to meet certain requirements if you are partnership, if you are seasonal employer, if you are farmers and ranchers, and it gives you all specific circumstances that you can go ahead and reapply for a PPP 1 loan increase. If you read this document now, March 5th, 9:06 AM, and maybe it has already changed, maybe as I’m recording this video, this is changing and I hope it does. Why? Because if you read this SBA document, it does not provide a way or list as a special circumstance that if you are a Schedule C filer and you received a PPP 1 loan approved that you can now reapply to get the loan increase using the new Line 7 PPP calculation formula. OK?
Once again, the good news is that this provides precedent that in the future, the SBA may add to this document. But as of today, if you got a PPP 1 as a Schedule C filer you are not able to reapply to get the loan increase. OK?
So those are the facts. And once again, I’m going to provide links to all these documents so you can read them for yourself. OK?
Now, let’s talk about – those are the facts. So now, let’s go to the prediction part, which is I really wanted to mention this in yesterday’s video but I was a little hesitant because in the past, every time we have said our prediction or said what we think or our opinion on what’s going to happen, we usually are pretty optimistic and people have criticized us in the past for providing false hope to small business owners. But I think in this video, I really need to basically say what we feel is going to happen. OK? And what’s happening now.
Our prediction is that if you got a PPP 1 approved as a Schedule C filer under the old formula that yes, the SBA will provide a way to get the increase. I think the SBA has done a phenomenal job. The SBA can – we can say that the SBA really has saved the small businesses in the US. And in this, I am in agreement and I am taking this quote from JJ the CPA, if you follow his channel, he is awesome. And in the video yesterday he said that the SBA really saved the small businesses, and I agree. They are doing an awesome job.
So I really think that at some point, the SBA is going to provide a way that if you got a PPP loan 1 approved as a Schedule C under the old formula that you are going to be able to reapply and get the loan increase. But as of today, that is not an option.
We feel that they are going to do it further down the line. Why do we think that they will not do it soon, maybe this week? And once again, this is our opinion and what we think. It may be different. The SBA may provide the way for you to do it later today. But we feel they are not going to do it. I think they are going to wait until the end of this round of PPP loans after the March 31st date to provide a way for you to do it. And this is why. This is what we think.
With our conversation with several banks, thank God we have very good communication and relationships with several banks, in this round of PPP loan applications, the banks are swamped. They have a lot of work. This round of PPP loan application has not gone as smooth as it should have. The SBA had issues with their portal. The banks had issues with their portal. On-going changes, it has been tough.
So if the banks and the SBA is already swamped with new applications for PPP loan, imagine what would happen if they open the gates to all those Schedule C filers who got PPP 1 and if they are able to reapply now, I think they really said it’s going to be too much.
Now, the good news is, and let’s go back, remember that I told that the date of this Procedural Notice of January 13th was important. Why is that good news? That’s good news because the first round of PPP ended in August of 2020. But the SBA provided a way to reapply in January of 2021. So that means that we have some kind of precedent that we have seen that even if the PPP loan date, the date that the program is going to end comes, the SBA may still provide guidance on how to reapply after that date.
First round of PPP was over August 2020. SBA provided a way to reapply to get an increase under certain circumstances January of 2021. So I think there is a high probability that I think the SBA and the banks have too much work to allow all those Schedule C filers to reapply now to get an increase and that they may provide a way because this PPP second round is going to end as of today, it may change, in March 31st. And once they finished this round of new PPP loan applicants that they may provide a way for Schedule C filers who already got the PPP approved to reapply for the increase with the new formula after this round is over. That’s what we think is going to happen. OK?
So don’t lose hope. I really feel it’s fair that if you got a PPP loan under an old formula that you’re able to get the difference with the new formula. I really think that’s fair. So that is our prediction.
Now, third part of this video, what should you do? You are a small business owner. You are the captain of your own ship. Small business owners are resilient in the US. We basically make this economy happen. OK?
Now, I’ve heard a couple of times doing consultations, “No, but I’m just an independent contractor. I don’t have a registered business. I’m not a business owner.” No. If you are an independent contractor, if you’re self-employed, you don’t necessarily have to have an LLC or have a corporation. You are a small business owner. You provide a service. You are a small business owner.
So, what should you do? Don’t listen to me. Don’t listen to other channels. Call the banks. Call the lender. Call the SBA. Move. Take charge of this situation. If you need funds to keep your business going, do something. OK? Call your lender. Maybe they already know something I don’t. Maybe they have other information. Maybe they can give you the increase now. I don’t know. But do something. Call the lenders. Call the banks. And if the banks tell you that, “No, it’s not possible to get the increase,” call your congressman. We have to do something. OK?
And if nothing happens, we can still trust God to provide for our tables, our families, and our businesses. And maybe it’s a hard road ahead if you’re going through tough times but we cannot lose hope and we cannot lose our faith in God Almighty. OK?
So basically, I just wanted – here in Freedomtax, we wanted to clear this up because we did see that there was a lot of confusion with our video that we posted yesterday saying that you could not ask for an increase and then we had a lot of people calling our office and saying about the SBA website that you can reapply. Now, you know the facts. Now, you know what we think is going to happen. And now, you know what you need to do. OK?
So really, I hope this has been helpful. OK? You know that we are praying for you. We are praying for you, for your family, for your business. Let’s stay safe. Let’s stay positive. We will get through this. OK? We will get through this together. All right?
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