The Small Business Association (SBA) has published new guidance about PPP Loan Forgiveness. We have been waiting and watching for guidance and the SBA has slowly been releasing information and regulations. Last week on August 4, the SBA posted a new downloadable PDF on their website entitled Frequently Asked Questions on PPP Loan Forgiveness. While this piece of guidance answers many questions and clarifies many concerns, one in particular that stood out to us concerns self employed people and the self employment compensation cap.
New Regulations for Self Employment Compensation
Under the section entitled Loan Forgiveness Payroll Costs FAQs, in Question 8, the document clarifies the new regulations governing forgivable compensation for self employed people.
Originally, forgivable self employment compensation was capped at $15,385. However, if the loan amount was calculated on $100,000 compensation, the borrower would have received $20,833. (This number is derived from a monthly compensation of $8,333.33 multiplied by 2.5, as proscribed for determining the loan amount.) The difference between $20,833 and $15,385 left a gap of roughly $5,000, and for many solopreneurs with little overhead, a rather sizeable loan amount to repay.
Recent regulations have fixed this issue by making the cap $20,833. So, for most borrowers, if the covered period is extended beyond eight weeks, they would easily meet this threshold without needing to include non-payroll expenses in the equation and have their entire loan forgiven.
We hope that this is good news for all of our self employed and solopreneur friends out there! Have you taken a PPP Loan? If so, it’s a good idea to download the PDF and read all of the new guidelines. And, go back and read our previous post about PPP Loan Forgiveness for an overview of the process of applying for loan forgiveness.
Need help navigating the PPP Loan Forgiveness application process? Contact us for a consultation. We are helping numerous clients through the process, and we can help your business, too.