(Updated – 04/26/20) Major Updates to PPP and EIDL

by | Apr 26, 2020 | COVID-19, Legal

CRITICAL UPDATE: As of Friday, April 24, the new bill authorizing $370 billion to the PPP and EIDL programs has been signed by the President and now we are waiting on the SBA to let us know when they will be processing new EIDL Advance applications. They have told banks that they will start processing new PPP applications on Monday, April 27 at 10:30am EST. Check here for the latest updates straight from the SBA. 

As promised, the guidance on the Paycheck Protection Program and the Economic Injury Disaster Loan Programs keeps changing. Here are the latest changes to the programs and guidance.

Update #1 – EIDL Advance Information Now Set In Stone

The calculation for determining the amount of the EIDL Advance is this: applicants will be eligible for $1000 per employee on the payroll as of 01/31/20. This is capped at $10,000 for the Advance. NOTE: If you are self-employed, a sole proprietor, or an independent contractor, you count as one employee. 

Here is the email sent out from the SBA last week.

Dear Applicant,

On March 29, 2020, following the passage of the CARES Act, the SBA provided small business owners and non-profits impacted by COVID-19 with the opportunity to obtain up to a $10,000 Advance on their Economic Injury Disaster Loan (EIDL). The Advance is available as part of the full EIDL application and will be transferred into the account you provide shortly after your application is submitted. To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.

Remember that no matter how much you end up getting from an EIDL Advance, it is forgiven if you do not receive an approved EIDL.

Update #2 – PPP / Treasury New Guidance for Sole Proprietors / Self – Employed and Other Groups

Two major updates from the Treasury Department have helped clarify the situation for sole proprietors, self-employed, and independent contractors. You can read the document that gives guidance to these groups here.

In a nutshell, here are some Q & A’s and Highlights

  • I have income from self-employment and file a Form 1040, Schedule C. Am I eligible for a PPP Loan?
    • You are eligible for a PPP loan if: (i) you were in operation on February 15, 2020; (ii) you are an individual with self-employment income (such as an independent contractor or 5 a sole proprietor); (iii) your principal place of residence is in the United States; and (iv) you filed or will file a Form 1040 Schedule C for 2019.

  • What if I am a partner in a General Partnership?

    • However, if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.

  • NOTE: In addition, you should be aware that participation in the PPP may affect your eligibility for state-administered unemployment compensation or unemployment assistance programs, including the programs authorized by Title II, Subtitle A of the CARES Act, or CARES Act Employee Retention Credits. What does this mean? Who knows right now.

  • Q: If I am a sole proprietor or self-employed, how do I calculate the maximum amount I can borrow and what documentation is required?

    • A: If you have no employees [ed. note for this calculation you do not include yourself if SP] here’s the procedure:

      • 1) Find Line 31 on Schedule C – if over $100,000, stop when you hit that limit. If $0 or less, you are not eligible for PPP loan.

      • 2) Divide Step 1 by 12 to get Average Monthly Net Profit Amount.

      • 3) Multiple Step 2 by 2.5.

      • 4) Add any money outstanding amount from an EIDL loan (subtracting any Advance.)

    • A: If you have W-2 employees, here’s the procedure:
      • 1) Find Line 31 on Schedule C – if over $100,000, stop when you hit that limit. If $0 or less, set this amount to $0.

      • 2) Add appropriate amounts for payroll costs.

      • 3) Divide Step 2 by 12 to get Average Monthly Net Profit Amount.

      • 4) Multiple Step 3 by 2.5.

      • 5) Add any money outstanding amount from an EIDL loan (subtracting any Advance.)

  • Note From Treasury: “Regardless of whether you have filed a 2019 tax return with the IRS, you must provide the 2019 Form 1040 Schedule C with your application.”

  • Q: How can PPP Loans be used by individuals with income from self-employment who file a 2019 Form 1040, Schedule C? 

    • Here’s what you can use it for:

      • Owner Compensation Replacement, based on 2019 net profits.

      • Employee Payroll Costs

      • Mortgage interest payments, business rent payments, business utility payments.

        • You MUST have claimed or be able to claim a deduction for such expenses on your 2019 Form 1040 Schedule C.

      • Interest payments on other debt obligations incurred before 02/15/20.

  • Note From Treasury: “The Administrator, in consultation with the Secretary, determined that it is appropriate to limit self-employed individuals’ (who file a form 1040 Schedule C) use of loan proceeds to those types of allowable uses for which the borrower made expenditures in 2019.
  • Q: What documentation will I be required to submit to my lender with my request for loan forgiveness?

    • A: In addition to the borrower certification form:

      • If you have employees, a Form 941 and state quarterly wage unemployment insurance tax reporting forms.

      • Evidence of business rent, business mortgage interest, or business utility payments.

      • The 2019 Form 1040 Schedule C must be used to determine the amount of net profit allocated to the owner for the eight-week covered period.

Update #3 – PPP / Treasury New FAQ

On April 23, 2020 the official FAQ document regarding the PPP from Treasury was updated and released. You can find that here. A few highlights from he FAQ I want to mention. Also, note Question 31 on the last page – this limits how large companies can accept PPP loans:

  • Q: Should payments that an eligible borrower made to an independent contractor or sole proprietor be included in calculations of the eligible borrower’s payroll costs?

    • A: No. Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

  • Q: I filed or approved a loan application based on the version of the PPP Interim Final Rule published on April 2, 2020. Do I need to take any action based on the updated guidance in these FAQs?

    • A: No. Borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in these FAQs.

  • Q: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period; when does that eight-week period begin?

    • A: The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.

Update #4 – Maddrey / ASMP Update on Calculating PPP Payroll Information

Finally, note that over last weekend, we revised our guidance regarding how to calculate PPP payroll amounts and costs based on new interpretations of the guidance from Treasury, SBA, banks and lenders, and CPAs. You can find that info here: bit.ly/asmp-ppp-amount. We have put together some excellent charts and info there based on what we currently believe to be accurate.


The fact is that this is all changing on a regular basis. We are going to attempt to stay on top of everything for you, but PLEASE LISTEN TO YOUR CPA, BANK, or LENDER. They are the ones who can be of the most help to you. As always, reach out to us at legal@asmp.org and look for more info coming soon.