This week the SBA announced another significant change to the PPP Loan Program for Schedule C filers in that the loans would be based off their GROSS RECEIPTS instead of Net Income. This is a massive change. The loan amount that a sole proprietor, independent contractor, or other Schedule C filer now qualifies for could be drastically higher than previously reported.
Take a small photography business who had total revenue of $50,000 and total expenses of $35,000 for the year. This would have given them a Net Taxable Income of $15,000, or a monthly annual average of $1,250, allowing them to apply for a PPP Loan of $3,125. With this change that same business, using the same tax year now qualifies for a PPP Loan of $10,416.65 ($50,000 divided by 12 multiplied by 2.5). With the rules in place that this money is not subject to tax, and was never subject to taxes for a Sch C filer small businesses have been handed an incredible lifeline. If They had already applied for a PPP Loan, unfortunately they may not apply for a loan for the difference, and the rules still apply that the second disbursement must show a drop in Gross Revenue to qualify, but the appeal is still huge.
With the SBA currently putting in place a March 31st deadline for applications time is running out to apply. The other catch with this program is your first loan must be forgiven before the second loan can be received, and if you applied recently, you must wait 8 weeks after the first disbursement before you apply for the second.
Questions on all this and how it can impact you? Call or email us today!
