PPP for Sole Proprietors: What to Know About the New Rules

Sole Proprietor

The Paycheck Protection Program closed in May 2021. This information has been archived for reference only.

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What is the PPP for sole proprietors and Schedule C businesses?

This most recent round Paycheck Protection Program (PPP) has been available to self-employed individuals since the beginning. The updated rules apply to any business that files on a Schedule C, including single-member LLCs, self-employed individuals and sole proprietors.

PPP offers self-employed individuals access to COVID-19 relief funding that can compensate for earnings lost due to restrictions and closures, or the general economic downturn that the crisis has caused. You can learn more about PPP and access a wide variety of resources through our PPP application information hub.

Can I apply using the new formula? (Updates)

Pursuit is accepting applications using the new formula for Schedule C businesses.

 

What are the new PPP rules for sole proprietors?

In summary, Schedule C filers are now able to calculate their PPP loan amount using gross revenue, rather than net profit. Because gross revenue figures are typically higher than net profit amounts, this means that independent contractors and other gig workers can qualify for higher loan amounts. Here’s a summary of the changes to PPP loans for sole proprietors and some resources that can help you easily apply the new formula.

Schedule C – without employees

Under the old rules, schedule C businesses calculated their loan amount using net profit (Schedule C – line 31). The new calculation is exactly the same, except you are able to use gross revenues (Schedule C – line 7). 

To calculate your PPP loan for sole proprietors amount, divide your gross revenue by 12 to get the figure for your average monthly income. Then, multiply that number by 2.5 (3.5 if this is your second PPP loan and you are in an industry with a NAICS code that starts with 72).

Additional details on this calculation are available in our how to calculate your PPP loan amount tutorial for Schedule C businesses without employees

Schedule C – with employees

Under the old rules, schedule C businesses with employees also calculated their PPP loan for sole proprietors amount using net profit (Schedule C – line 31). The new calculation allows these businesses to calculate their loan amount using gross revenue (Schedule C – line 7), minus any payroll expenses (Schedule C – lines 14, 19 and 26). 

To calculate your loan amount, subtract the total of lines 14, 19 and 26 from line 7. Divide this figure by 12, then multiple by 2.5 (3.5 if your NAICS code starts with 72.

Additional details on this calculation are available in our how to calculate your PPP loan amount tutorial for Schedule C businesses with employees

Can I reapply for PPP if I was declined originally for showing a net loss?

Yes, you can now qualify for PPP even if you show a net loss on line 31 of your Schedule C. However, if the updated calculation method based on the gross profit on Line 7 of Schedule C yields an eligible loan amount, you may not be eligible for the program. 

If you previously applied with Pursuit and it was deemed ineligible because you showed a net loss, please reach out to [email protected] and ask for your loan application to be revisited. Please include your business name in the email. Please do not submit a new application through our website as this will be viewed as a duplicate and will not be processed.

Information for Pursuit PPP borrowers

If you have applied, or plan on applying, for a PPP loan with Pursuit, your options to apply using the new formula depend on where your loan is in the process:

  • If your PPP loan has already funded (meaning that the funds have transferred into your bank account), we are not able to modify the loan or increase the amount using the new calculation. The SBA rules (which are outside of Pursuit’s control) do not allow for loans previously made to be changed retroactively.
  • If your loan has been approved by SBA, but your loan has not yet funded, you may be able to cancel your application and apply again. SBA states that the new rules are effective for loans approved on or after March 4th. Loans that were approved prior to March 4th are not able to be changed. Loans that were approved on or after March 4th can withdraw and reapply using the new calculations.

     

    Please note that the program deadline is currently March 31st and you are potentially risking not obtaining a new approval before the deadline. Please reach out to [email protected] if you seek to have your current approval withdrawn.

  • If you have submitted your loan application to Pursuit, but it has not yet been approved, our team will reach out to you to see if you would like to change your application. This will provide you with the opportunity to update your average monthly payroll and loan amount calculations under the new SBA guidelines. 
  • If you have started but not completed your loan application, you can now proceed using the new calculation.
  • If you previously applied and were declined, but believe you qualify under the new rules, you may reapply. Please email [email protected] to have your previous application unlocked so that you may resubmit. 

Turn to a local lender for PPP

While Pursuit is offering PPP loans nationwide, we’re focused on helping businesses in NY, NJ and PA access the program. Applying with Pursuit means working with an experienced local lender that’s already helped more than 7,000 small businesses access PPP. You can take advantage of responsive customer support and an easy to use online PPP application. We look forward to serving you! 

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