Exclusive access period coming to PPP; other changes forthcoming
TAX ALERT |
Authored by RSM US LLP
On Feb. 22, 2021, the Biden-Harris administration announced changes to the Small Business Administration (SBA) Paycheck Protection Program (PPP). These changes include a 14-day exclusive access period, starting Wed. Feb 24, under which only businesses with fewer than 20 employees can apply for loans and a change in how sole proprietors, independent contractors and self-employed individuals calculate their loan amounts. Also included in the announcement are changes in eligibility for certain borrowers with prior non-fraud felony convictions, borrowers who are delinquent on their federal student loans and borrowers who are non-citizens but lawful U.S. residents.
The 14-day exclusive access period comes with little warning to non-qualifying borrowers. However, 2021 PPP has been open to all borrowers since Jan. 19, 2021 and has approved over 1.9 million loans totaling over $140 billion. With 37 days left until the March 31, 2021 end of the program, approximately $144 billion remains untapped.
The Biden-Harris administration’s changes in loan amount calculation may help many sole proprietors, independent contractors and self-employed individuals. For these borrowers, the total loan amount may now be based on gross income instead of net income, which is generally found as ‘net profit’ on Schedule C. These borrowers could use the 2019 or 2020 Schedule C amounts to determine the loan size and the requirement to use net profit significantly limited loan sizes. In extreme cases, the loan sizes were limited to only $1. However, the administration has yet to release guidance for lenders on these changes. Such guidance may not come until next month, leaving these borrowers in a potential bind.
Finally, as many potential 2021 PPP borrowers may be aware, the SBA approval for the loan is taking longer than the 2020 PPP approval. The SBA has changed its approval process to insert fraud checks prior to authorization. Additionally, while lenders have received guidance on how to overcome certain error codes during the approval process, the clearance process to get the loan through the system does still take extra time.
This article was written by Mathew Talcoff, Justin Stallard, Ryan Corcoran , Debbie Singer and originally appeared on 2021-02-23.
2020 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Pugh CPAs is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Pugh CPAs can assist you, please call 865.769.0660.
Call us at 865.769.0660 or fill out the form below and we'll contact you to discuss your specific situation.