The Small Business Administration (SBA) is revising the Paycheck Protection Program (PPP) in a few key areas to increase its attractiveness to smaller businesses impacted by the COVID-19 Pandemic. Chief among the revisions is offering PPP loans exclusively to the smallest businesses employing fewer than 20 employees, sole proprietorships, independent contractors, and self-employed individuals (VSBs) from Wednesday, February 24, through Wednesday, March 10, 2021.
In addition, it is believed that the SBA will revise the PPP loan application for VSBs in the coming days significantly increasing availability of PPP funding to VSBs. Under the PPP funding formula in place since early 2020, PPP funding is based on the number of employees of the business and calculated at 2.5 times payroll costs. The de minimis PPP funding available to VSBs having few employees has failed to provide the necessary financial assistance to VSBs. VSBs having no employees have been directed to utilize Line 31 (net profit) from IRS Form 1040 Schedule C. The low net profitability of many VSBs has again negated the PPP as a viable funding source to aid in the continued operations of these businesses. Although formal guidance has not yet been published, it is believed that the SBA’s revision to the PPP loan application will predicate PPP financial assistance upon the VSB’s gross income (likely capped at $100,000).
We recommend that VSBs contact their lenders immediately and closely monitor the SBA COVID-19 Guidance Page for information pertaining to a revised PPP loan application.
Whatever questions you may have regarding the PPP or any other matter that you believe impacts you or your business, our attorneys are ready to guide you and may be reached at 201.487.3800.
As always, we are here to serve you. Winne Banta Basralian & Kahn, P.C.