Major changes to PPP! Updates to help smallest businesses for 2021

In this 2-minute read:

  • Biden-Harris administration and SBA announce updates to PPP loan process and rules to “Further Promote Equitable Access to Relief”
  • 1040/Schedule C filers now able to use GROSS profits in calculating their max PPP loan amounts, rather than net
  • 14-day “exclusive application period” starting 2/24 will permit only businesses with fewer than 20 employees to apply
  • $1B set aside for smallest businesses in LMI census tracts
  • All employees (seasonal, part-, or full-time) will count as 1 employee each
  • Felons will no longer be excluded from applying
  • Non-citizen-owned businesses will be able to apply for PPP loans


Please note, though the PPP application deadline is being extended, you only have until May 31, 2021 to get your application submitted to the SBA. After that, the SBA will only process existing applications that have already been submitted, until the PPP deadline of June 30, 2021.

The White House announced on February 22, 2021 several new changes and rules for America’s small businesses, independent contractors, and self-employed individuals seeking financial relief under the Paycheck Protection Program. These changes aim to further “target the PPP to the smallest businesses and those that have been left behind in previous relief efforts.”

What it means is good news for (among others) independent contractors, sole proprietors, and eligible self-employed individuals who file their 1099/1040 forms using Schedule C. Let’s go over some of the changes, what we know, and what we don’t yet know. 

There are new rules, a new PPP application form for Schedule C applicants, and new calculations for determining maximum PPP loan amounts for some applicants. Check back for more updates to this post as things progress.

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Applicants using 1040/Schedule C to apply can now use GROSS profits in calculating their max PPP loan amounts

This is great news for truly small businesses, independent contractors, sole proprietors, and eligible self-employed applicants. In an effort to provide more meaningful relief for this group, the new rules allow applicants to use their gross income from line 7 of form 1040 Schedule C, instead of of net profit (line 31) as the basis for calculating their average monthly payroll, and determining their maximum PPP loan amount. See the new application form for Schedule C filers.

In addition, the Biden-Harris administration will set aside $1 Billion for Schedule C applicants that don’t have employees, and that are located in LMI census tracts (low- and moderate-income).

A new application form for Schedule C filers is forthcoming, along with an IFR (Interim Final Rule) on this issue.

14-day “Exclusive Application Period” Starting Wednesday, February 24: only businesses with fewer than 20 employees are allowed to apply 

In order to focus PPP relief on America’s smallest and under-served businesses and individuals, the SBA instituted a 2-week lockout for new PPP applications for businesses with 20 or more employees. This exclusive application period began at 9 a.m. on February 24 and continued through Tuesday, March 9, 2021.

Applications that have already been submitted TO THE SBA continued to be processed during the exclusive application period, but new applications submitted from businesses with 20 or more employees were not accepted during the 14 day window.

Changes to “what counts as an employee?”: Full-time, part-time, seasonal all equal 1 employee

The new changes simplify the calculation of the number of employees for PPP applications. All full-time, part-time, and seasonal employees will be counted as one employee (per employee).

PPP applicants with student loan debt delinquency will no longer be excluded

Formerly, businesses with 20% more owners who were delinquent on student loan debt were prohibited from getting PPP loans. The SBA has partnered with the Treasury and Education departments and will remove the hold code/compliance check error code from the SBA database.

Non-citizen businesses that are lawful residents and file using an ITIN will be allowed to receive PPP loans

The new rules will allow PPP loans for non-citizen businesses as long as they are lawful residents and file taxes using their Individual Taxpayer Identification Number (ITIN) issued by the IRS.

This ITIN is a 9-digit number in format 9XX-XX-XXXX and always begins with 9. Previously only U.S. citizen-owned businesses had been allowed to apply for PPP loans.

Small business owners with prior non-fraud felony convictions will no longer be prohibited from getting PPP loans 

Currently, a business is ineligible for PPP if it is at least 20 percent owned by an individual who has either: 

  • (1) an arrest or conviction for a felony related to financial assistance fraud within the previous five years; or 
  • (2) any other felony within the previous year. 
    • Pending a new bipartisan bill, this second restriction will be eliminated.

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