Last Wednesday the White House announced changes that will make forgivable or partially forgivable Paycheck Protection Program (PPP) loans viable for many single person businesses who previously did not qualify for loans, or whose loan amounts were small because they did not have additional employees and because loan amounts were calculated based on their Net Profit.
Loan amounts for these businesses will now be based on Gross Income (before expenses), potentially qualifying them for much larger loans. CERF+ has been advocating for this change since last spring and is pleased that this change will make the PPP loans useful for many artists, contractors, gig workers, and other businesses who were not previously served by them.
In addition, through March 9th, only businesses and nonprofits with fewer than 20 employees will be allowed to apply for PPP loans – putting smaller businesses in the front of the line.
The new rules:
- Allow sole proprietors, independent contractors, and self-employed individuals to receive more financial support by revising the PPP’s funding formula for these categories of applicants;
- Loan amount based on Gross Income (before expenses) rather than Net Profit (or loss)*
- Using 2019 or 2020 Schedule C*
- Maximum amount is Gross Income (line 7) divided by 12 (one month income) times 2.5*
- Eliminate an exclusionary restriction on PPP access for small business owners with prior non-fraud felony convictions, consistent with a bipartisan congressional proposal;
- Eliminate PPP access restrictions on small business owners who have struggled to make student loan payments by eliminating student loan debt delinquency as a disqualifier to participating in the PPP; and
- Ensure access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Number (ITIN) to apply for the PPP.
*Represents our understanding of the calculations at the time of writing. Check with your lender to confirm details and rules governing how much of the loan may be forgivable.
“The new calculation is potentially a game-changer for many artists and other non-employer businesses,” said Craig Nutt, CERF+ Advisor on Policy and Government Relations. “We encourage artists to get out their tax returns and contact a lender to see if a PPP loan is right for them.”
This round of PPP loans will be open until March 31, 2021. Please note that these changes are still working their way down to banks. Contact a lender as soon as possible to take advantage of the preferred status of smaller businesses before March 10.
Additional Resources:
Office Hours with Nina: Weekly on Fridays at 11:00 AM EST. Nina Ozlu Tunceli from the Americans for the Arts Action Fund answers your questions about accessing federal relief.
Updated Information on PPP Changes from the Freelancers Union
More information from the Small Business Administration
Watch President Biden’s announcement about changes to support small businesses