No PPP Loan Increase

No PPP Loan Increase for Schedule C If You Already Got PPP Loan Approved


The new Interim Final Rule published by the SBA on March 3, 2021, says that Schedule C filers who already got a PPP loan approved will NOT be able to reapply to get more PPP loan funds with the new PPP loan formula. The new PPP loan formula will only apply for self-employed, independent contractors and sole proprietors that submit a new PPP loan application.

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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. is 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.

The U.S. Small Business Administration (SBA) issued new Paycheck Protection Program (PPP) rules that allow self-employed individuals who file Form 1040, Schedule C, Profit or Loss From Business, to calculate their maximum loan amount using gross income instead of net profit.

The change opens the door for larger loans to self-employed individuals, many of whom don’t record much, if any, net profit on their Schedule C.

The calculation change is detailed in a 32-page interim final rule published late Wednesday afternoon by the SBA, which administers the PPP in partnership with Treasury. The SBA also released an updated set of frequently asked questions and six updated or new application forms, as follows.

Updated PPP borrower first-draw (Form 2483) and second-draw (Form 2483-SD) application forms.

New PPP first-draw (Form 2483-C) and second-draw (Form 2483-SD-C) borrower application forms for Schedule C filers using gross income.

A revised lender application form for PPP loan guaranty (Form 2484)

A revised PPP second-draw lender application form (2484-SD)

The interim final rule, titled “Business Loan Program Temporary Changes; Paycheck Protection Program — Revisions to Loan Amount Calculation and Eligibility,” revises the maximum loan calculations for sole proprietors who file Schedule C returns, but the change is not retroactive. The SBA and Treasury have ruled that borrowers whose PPP loans already have been approved cannot increase their loan amount based on the new methodology.

The new IFR allows a Schedule C filer who has yet to be approved for a PPP first- or second-draw loan in the current, $284.5 billion phase of the program to elect to calculate the owner compensation share of its payroll costs based on either net profit (as reported on line 31 of Schedule C) or gross income (as reported on line 7 of Schedule C).

If a Schedule C filer has employees, the borrower may elect to calculate the owner compensation share of its payroll costs based on either net profit or gross income minus expenses reported on lines 14 (employee benefit programs), 19 (pension and profit-sharing plans), and 26 (wages (less employment credits)) of Schedule C. If a Schedule C filer has no employees, the borrower may simply choose to calculate its loan amount based on either net profit or gross income.

The IFR provides different sets of maximum loan calculation instructions for Schedule C filers with no employees (see pages 10–11 of the PDF) and with employees (see pages 11–13). These borrowers may use their PPP proceeds to cover the following:


Video Transcript


Hello from Freedomtax Accounting. We are an accounting firm where we have been providing quality tax and accounting services now for over 20 years. We wanted to bring you the latest update on the new PPP Loan formula that is available for Schedule C filers.

So, if you file your business taxes on a Schedule C, meaning you’re self-employed, independent contractor, sole proprietorship, if you are going to apply for the PPP Loan, you are going to be able to get a higher amount because of the new changes on how you calculate the PPP Loan. Instead of using Line 31 of your Schedule C which is your net profit, you are now able to use Line 7 which is your gross income.

But for all of you who already got PPP Loan as a Schedule C, unfortunately, you will not be able to apply for the increase. So at least, that’s what the rule says as of today. OK? Let me show you.

Last night, the SBA published this 32-page interim final rule where it provides details on the new rules regarding the PPP Loan Program and it talks about the details on how the new PPP Loan formula is going to work for the Schedule C. If you scroll down to page 7 of this 32-page document which we will provide a link to this document in the description of this video so you can read it, you can clearly read that it says here, “A borrower whose PPP Loan has already been approved as of the effective date of this rule cannot increase its PPP Loan amount based on the new calculation methodology.” OK?

So, this is kind of bad news for a lot of people who were expecting that if they had received a PPP Loan, either PPP 1 or PPP 2 as under their Schedule C that they would have been able to apply to get the increase and get the difference. At this time, that is not an option. So the new PPP Loan formula is for new PPP Loan applicants that file under Schedule C.

So if you got PPP 1 already as under the Schedule C, you cannot ask for an increase for your PPP 1. Now, if you got PPP 2 already, you cannot apply for an increase.

Now, if you got PPP 1 and you’re going to file for PPP 2, you still have to meet the at least 25% reduction in revenue rule in order to be eligible for PPP 2. But if you got PPP 1 and you find out that you are eligible for PPP 2 and you are going to apply for PPP 2 now, you can get PPP 2 with the new calculation.

If you haven’t received a PPP in 2020, if you have never received PPP 1 nor 2 and you want to apply for PPP 1 now, if you file under a Schedule C, you can use 2019 and 2020 or 2020 Schedule C and you file now for the PPP, you are going to be able to use the new formula and get a higher PPP Loan amount.

Now, if you have submitted a PPP Loan application with your lender and it has still not been approved then we suggest that you contact your lender as soon as possible to see if they can make the change in the application before they approve it.

Some banks are saying that if you have a pending application with them and you want this new formula to be included in your application, you are going to have to cancel the application you have pending and start a new application. That’s good but then you risk not having your PPP approved on time. Why? Because you have to get a PPP Loan approved before March 31st which a lot of people want that date to be pushed back but if you read the interim final rule in those 32 pages, there is a paragraph there that says that apparently, the SBA is not changing that March 31st date.

So anyway, this is good news for Schedule C filers who have not applied for PPP 1 or PPP 2 yet. You’re going to be able to get more PPP, a higher PPP Loan amount. But it’s bad news for all the Schedule C filers who already got PPP. They will not be able to get the increase at this time. Maybe in the future you are going to be able to apply it but as of today, the rule says you cannot get the increase.

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