PPP Update: Borrowers can use gross income

On March 3, 2021, 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.

Here is the new Borrower Application 2483-C form for reference. An applicant may use this form only if the applicant files an IRS Form 1040, Schedule C, and uses gross income to calculate PPP loan amount.

Per the new interim final rule, Business Loan Program Temporary Changes; Paycheck Protection Program – Revisions to Loan Amount Calculation and Eligibility, the new calculation methodology may be implemented for loans that are approved after the effective date of the ruling. The calculation cannot be applied retroactively. Therefore, a borrower whose 1st or 2nd round PPP loan has already been approved cannot increase its PPP loan amount based on the new calculation methodology. More details can be found in the full interim final rule.

Simultaneously, the SBA released an updated set of frequently asked questions and several applications:

• 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 second draw loan guaranty (2484-SD).
• A revised lender application form for PPP loan guaranty (Form 2484).

Please contact your CPA if you need any assistance.