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The Small Business Administration on Wednesday released a new order and loan calculation formula for Pay Check Protection Program loans for self-employed and temporary workers.
For these small businesses, this will mean higher amounts of forgivable loans in the future.
The new PPP application for self-employed workers and individual landlords presenting Form 1040, Annex C of the IRS, now asks for the total gross revenue amount, found on line 7 of the tax form. Previously, Schedule C filers applying for PPP loans were asked to provide SBA with their net profit, line 31 of the form.
In addition, the SBA has released updated guidelines for lenders on calculating loan amounts for Schedule C filers and new eligibility rules for borrowers, including those who struggled with student loan debt, were convicted of non-fraud crimes or were homeowners. of non-citizen companies.
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The Biden-Harris administration announced in late February updates to the SBA program to help smaller businesses gain access to forgivable loans. At the same time, the government announced a priority enrollment window for some borrowers – as of February 24, creditors only processed requests from companies with fewer than 20 employees and will continue to do so until March 9.
But this has created confusion for some borrowers and creditors. Although the priority window was opened at the end of February, the new eligibility rules and the updated loan calculation formula for some borrowers have not been set to take effect until the first week of March.
Now that the SBA has released the updated application for sole proprietors, as well as the provisional final rule with revisions to the calculations and eligibility of the loan amount, borrowers should be able to work with their lenders to submit applications under the new guidelines. . To be sure, it will take time for creditors to digest and implement the new information.
The new calculation is important for millions of individual and self-employed owners and concert workers in the United States, as it will lead to larger forgivable loans through the program.
Previously, the SBA used net income as a substitute for payroll costs for companies without employees, although payroll and profit are different measures.
In addition, the net revenue line on IRS Form 1040, Appendix C, includes deductions, which have reduced or eliminated the value of some, leading to small loans or making them ineligible for the program. Using gross income – usually a higher number – will solve some of these problems.
This is news in development. Please check again for updates.
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