SBA tweaks formula to help sole proprietorships get Paycheck Protection Program funds

March 8, 2021

Land Line Staff


A new rule proffered by the U.S. Small Business Administration should help sole proprietorships receive more financial support via an emergency relief loan from the Paycheck Protection Program.

The rule, which was published in the Federal Register on Monday, March 8, allows sole proprietors to use their gross income to calculate the maximum amount they are eligible for under the loan program. If a sole proprietor has no employees, they can use their gross income number in the same way that the net profit number has been used for PPP loan calculations in the past.

Last month, the SBA announced changes to its Paycheck Protection Program aimed at helping sole proprietors and independent contractors. In addition, $1 billion will be set aside for businesses without employees located in low- and moderate-income areas.

Prior to the changes, many sole proprietors and independent contractors had been “structurally excluded” from the PPP because of how the loans were calculated, according to a White House fact sheet issued Feb. 22. Even when these businesses were approved for a loan, the White House said there were instances of businesses being approved for as little as $1.

The Owner-Operator Independent Drivers Association pushed SBA to make changes to the Paycheck Protection Program in order to provide economic relief for small-business trucking operations during the COVID-19 pandemic.

OOIDA Director of Legislative Affairs Bryce Mongeon says the changes address a couple of problems OOIDA had pointed out about the previous rules. Specifically, the Association said that using the net profit number excluded many applicants from the loan program and that the new changes also allow sole proprietors to cover more of their fixed and operating expenses. Language in the new rule specifically addressed OOIDA’s concerns that using net profit excluded many applicants from the first round of PPP funding. The new rule also will allow sole proprietors to cover more of their fixed and operating expenses.

“We believe these changes to the Paycheck Protection Program may help owner-operators finally get access to loans, and we appreciate that they are being made,” Mongeon said when the changes were announced. “Over the last year, we have told Congress and SBA about the problems OOIDA members have had accessing loans because of the strict way maximum loan amounts are calculated. While these changes may be beneficial, the program ends soon on March 31.”

Other changes to the loan program include:

  • Establishing a 14-day, exclusive PPP loan application period for businesses and nonprofits with fewer than 20 employees.
  • Allowing 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.
  • Eliminating an exclusionary restriction on PPP loan access for small-business owners with prior nonfraud felony convictions, consistent with a bipartisan congressional proposal.
  • Eliminating PPP loan access restrictions on small-business owners who have struggled to make federal student loan payments by eliminating federal student loan debt delinquency and default as disqualifiers to participating in the PPP.
  • Ensuring access for noncitizen small-business owners who are lawful U.S. residents by clarifying that they may use an individual taxpayer identification number to apply for the PPP loan.

The previously announced 14-day exclusivity period for small businesses and sole proprietorships ends Wednesday, March 10. The deadline to apply for a PPP loan is March 31.

Borrowers can apply by downloading the First Draw PPP loan application or Second Draw PPP loan application and working with a participating PPP lender through the SBA Lender Match tool. LL

Senior Editor Mark Schremmer contributed to this report.