Key takeaways on new PPP rule

ICBA offers the following community bank takeaways on this week's SBA interim final rule, frequently asked questions, updated application forms, and webinar implementing Paycheck Protection Program changes for IRS Form 1040, Schedule C filers.

Schedule C borrowers

Effective Date: The platform will start accepting applications on the new form for Schedule C borrowers using gross income today, March 5.

Loan Increases: No loan increases are allowed, and the rule is not retroactive to previously completed loans.

Withdraw or Cancel and Reapply: In certain instances, however, the loan can be withdrawn or cancelled and then the borrower can reapply.

  • If the application has been submitted and not yet approved, withdraw the application and reapply using the new application form.
  • If the loan is approved by SBA, but not disbursed, cancel the loan in E-Tran Servicing (not the Platform) and reapply using the new form.
  • If the loan is disbursed but not yet reported on Form 1502, cancel the loan in E-Tran Servicing, have the applicant repay the loan, and then reapply using the new form.
  • If the loan has been disbursed and reported on Form 1502, the loan cannot be cancelled or increased.
  • Note that once a loan is cancelled in E-Tran Servicing, it takes a couple of days to be reflected in the Platform, and then you can reapply.

Partnerships and LLCs: Partnerships may not use the new gross income method or form for Schedule C borrowers.

  • Single member LLCs that file Schedule C may use the gross income method and new application form.
  • Qualified joint ventures as defined by the IRS (generally married couples that file jointly, both materially participate in the business and each elect not to be treated as a partnership) can apply as Schedule C borrowers using gross income.
  • See the instructions on the loan application form for more information. (These same rules apply to farmers seeking to use gross income to calculate loan amounts.)

Webinar slides: The webinar slide deck includes additional information, including new rules regarding applicants with criminal histories or student loan defaults.

Key FAQs

The SBA's new FAQs also includes these key updates.

  • FAQs 57 and 58: defines lobbying activities as it applies to eligibility of 501(c)(6) organizations and destination marketing organizations; and clarifies that PPP proceeds may not be used for lobbying activity expenses by any PPP borrower.
  • FAQs 59 and 60: borrowers who filed for bankruptcy after disbursement of their First Draw loan are eligible for forgiveness if funds were used according to forgiveness rules, but are not eligible for a Second Draw loan.
  • FAQ 61: a borrower may certify on a Second Draw application that it will have used all First Draw proceeds “only for eligible expenses” (if true), even if it doesn’t use 60 percent for payroll, in which case forgiveness will be reduced.
  • FAQ 62: a borrower that received partial forgiveness of its First Draw loan is eligible for a Second Draw loan as long as the borrower used the full amount of its First Draw PPP Loan only for eligible expenses listed in the consolidated IFR implementing PPP updates.
  • FAQ 63: clarifies that alternative business size standards are not applicable to Second Draw loans. Generally, borrowers must have no more than 300 employees, with a few limited exceptions.
  • FAQ 64: outlines which borrowers may use an Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number (SSN) when applying for a PPP loan.
  • FAQ 65: for PPP borrowers who claim the Employee Retention Credit, payroll costs that are qualified wages for the Employee Retention Credit are not eligible for loan forgiveness if the employer elects to claim the credit for those amounts.

More: The new PPP application forms and resources are available on the SBA and Treasury sites. More information is on ICBA's PPP and EIP News page.