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New SBA Rules for PPP Borrowers

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On Wednesday afternoon, March 3, 202, the U.S. Small Business Administration (“SBA”) issued new rules entitled, “Business Loan Program Temporary Changes; Paycheck Protection Program – revisions to Loan Amount Calculation and Eligibility.” This set of rules allows those self-employed individuals who file Schedule C (Profit or Loss from Business on their individual 1040) to use gross income instead of net profit to calculate their maximum loan amount for Paycheck Protection Program (“PPP”) Loans. But borrowers will be able to calculate their loan on either the net profit or gross income, minus certain expenses.

Published as a 32-page interim final rule (“IFR”) by the SBA, the guidelines specifically revise how the maximum loan calculations for sole proprietors who file Schedule C returns are calculated. However, this will not be retroactive to loans that were approved prior to the IFR and those loans will not be eligible for increases. 

Two other key provisions include these actions:

  • Taking further steps to mitigate fraud by eliminating the safe harbor for Schedule C filers that have more than $150,000 of gross income to calculate its first-draw PPP loan.  Under these circumstances, the Schedule C filers will not be able to claim the safe harbor for borrowers with loans less than $2 million.
  • Eliminating the loan necessity safe harbor for these borrowers because they may be more likely to have other available sources of liquidity to support ongoing operations than Schedule C filers.

We will continue to keep you up-to-date on the latest PPP news, especially as industry groups push the SBA to extend the PPP application period by at least 60 days.

For more information please contact Chris Martin at

Chris Martin is a Member of the Firm in the Accounting and Auditing Practice at SobelCo, has worked closely with mid-sized, privately-held businesses throughout his entire career. He adds value by assisting clients with their financial statement needs, providing strategic planning for their corporate and individual income taxes, and taking an active role in consulting on major financial decisions.