Self-employed and gig workers can now apply for PPP loans under the new rules. Here’s what you need to know
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Self-employed and gig workers who have been waiting for new rules that would mean bigger forgivable loans under the paycheck protection program can now continue processing their applications.
As of Friday, the Small Business Administration will be ready to accept and process updated PPP applications from sole proprietorships who want to benefit from a new credit calculation, the agency confirmed.
This means that sole proprietorships can finally submit their applications to lenders who can forward them to the SBA for processing according to the new credit calculation guidelines.
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The changes came after the Biden administration announced updates to PPP in late February, including revised loan calculation for sole proprietorships, as well as new eligibility rules for some non-citizens, those with specific criminal records, and those who were in default or defaulted on student loan debt were .
In addition, the administration announced a 14-day priority window for companies with fewer than 20 employees to apply to PPP. The period started on February 24th and ends on March 9th.
While the priority period’s focus was on giving the smallest, disproportionately female and minority-owned businesses a head start in funding, the timing of the new credit calculation rule created confusion for some. The SBA didn’t release guidelines on the new calculation to lenders until March 3, and wasn’t ready to process updated applications in their system until Friday.
What you should know before applying
Now that the SBA is ready to accept and process applications, small businesses should be able to apply for PPP and be subject to the new loan calculations.
To be sure, some lenders may still be working on uploading the new applications to their system. Therefore, business owners should confirm that they have the correct application forms.
The updated PPP applications for self-employed and sole proprietorships filing the IRS Form 1040 Schedule C now ask for the total gross income amount on line 7 of the tax form. Previously, Schedule C applicants applying for PPP loans were asked to report their net income from line 31 on the form to the SBA.
Those applying for a PPP loan for the first drawing should use Form 2483-C, and those applying for a loan for the second drawing should use Form 2483-SD-C, which contains the new calculation information.
The priority application window
Time is running out for small companies that are subject to the new rule and want to take advantage of the priority application deadline. The window will close on March 9th at 5:00 p.m. (CET). At this point, lenders will be able to process applications from small businesses of all sizes.
However, sole proprietorships can apply for and view processed loans from lenders after the priority window is closed. The deadline for the program as a whole is currently March 31, unless it is extended by Congress.
Additionally, lenders say they don’t believe the program will run out of money until the March deadline. That year, as of Feb. 28, the SBA had approved 2.2 million loans, representing more than $ 156 billion, just over half of the $ 284 billion the program had when it reopened in January.
“Given the rate at which the funds are being used up, it doesn’t seem like they’ll all be used until March 31,” said Alex Prombaum, president of Liberty SBF, a non-bank lender. “The priority window could expire, but it doesn’t mean people will be left out in the cold.”
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