PPP Changes Bring Relief for Self-Employed

Self-employed and contract workers in the hospitality industry can breathe a sigh of relief as it seems they will eligible for loan forgiveness under the government’s Paycheck Protection Program (PPP).

The financial aid package, unveiled in March and tweaked several times since then, will provide much-needed succour for the self-employed it has been clarified. While previous PPP rules made it difficult for self-employed workers to get above the 75% payroll threshold, changes will now make it easier.

The SBA filed its 19th Interim Final Rule (IFR), ensuring full forgiveness for self-employed, freelancers and independent contractors who took the maximum loan amount based on 2.5 times their 2019 monthly income. 

The flexibility act includes a raft of welcome changes, including extending the maturity date for loans granted after June 5th from two to five years. The period for the loan forgiveness was extended from eight weeks to 24 weeks and the required payroll spend fell from 75% to 60%.

Welcome news yesterday from the IRF included guidelines on how to calculate owner compensation, employee compensation and non-payroll costs. 

Owner Compensation

Can be compensated in two ways:

Eight weeks’ worth (8/52) of 2019 net profit (up to $15,385) for an eight-week covered period, or 

2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period.

Employee Compensation

Payroll costs are capped at $100,000 of annualised pay. Now instead of $100,000/52 * 8 (a max of $15,385 per individual), you get up to $100,000/52 *24, making the new maximum forgiveness cap $46,154 per individual for 24 weeks. 

Non-payroll expenses

Loan forgiveness amounts for non-payroll expenses have been extended to 24 weeks including mortgage, rent and utility.

The SBA has also released 2 new forms for two new applications: a revised full-loan application and a new EZ Version. The EZ version applies for borrowers who are self-employed and have no employees.

Please do your own research. This article is an indication of changes to the PPP as noted by media commenters, it is not legal advice and cannot be construed as such.