Self-employed gig employees are nonetheless ready for the bigger mortgage PPP guidelines

Virojt Changyencham | Moment | Getty Images

The self-employed and gig staff are eagerly awaiting the Small Business Association’s update of guidelines for their paycheck protection program, which could mean bigger credit for the group.

The Biden administration last week announced changes to how the SBA will calculate forgivable loans for sole proprietorships and other small businesses with no employees. The updated formula, which is likely to result in larger loan amounts for non-employer businesses, including sole proprietorships and independent contractors, will be announced this week.

It’s still unclear during the week when the SBA will update its guidelines, which means those who would benefit from the change should still wait to submit their applications for the program.

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“Loans submitted before the official rule changes are subject to the rules in force at the time of application,” said Carol Wilkerson, an SBA spokeswoman.

This has frustrated some who want to take advantage of the two-week priority application window for the smallest businesses, which went into effect on February 24th and ends the second week of March. It goes without saying that sole proprietorships can continue to apply for PPP loans until the end of the program at the end of the month. As soon as the 14-day exclusivity window is closed, they will simply no longer be given priority.

Lenders are currently working to help borrowers prepare for the updated guidelines.

“We’ve always taken the approach, ‘hey, we don’t have all the answers, but let’s go as far as we can without the answers,” said Ed Barry, CEO of Capital Bank, based in Rockville, Maryland.

Barry added that the bank is also working to raise awareness among small businesses that may not realize they are now eligible for a PPP loan.

What is known about the formula change so far?

For companies with employees, the maximum PPP loan is 2.5 times the average monthly wage cost per SBA. As a substitute for single wage billing, the SBA used net income information from tax returns, although payroll are different measures.

In addition, the net profit line includes deductions that reduced or eliminated the winning numbers, added small loans, or made them ineligible for the program for some.

The updated formula instead uses gross income as a substitute for labor costs, a larger number than net income, which means many businesses are getting more money on forgivable loans.

Loans submitted prior to the official rule changes are subject to the rules in effect at the time of application.

Carol Wilkerson

SBA spokesman

“It’s a huge change,” said Keith Hall, president and CEO of the National Association for the Self-Employed.

The change is important because sole proprietorship is the most common business structure in the United States. There are around 41 million self-employed people in the country, according to the IRS, and in 2018 more than 27 million had submitted feedback with an IRS 1040 schedule C-Form for sole proprietorships, according to the agency.

Many of these companies are particularly hard hit by the coronavirus pandemic. About 70% of these without employees are owned by women and black people, and 95% of black-owned and 91% of Latino-owned companies are sole proprietorships, according to SBA.

So far, however, very little forgivable funding has gone from the SBA to sole proprietorship. According to a recent poll by NASE, nearly two-thirds of its members said they had not received any money from the program.

Much of this was due to the confusion in the early days of the program about eligibility and forgiveness, which hopefully is clearer today, Hall said.

“Many of the reasons these small business owners didn’t apply for or approve a PPP loan – I think a lot of those barriers have been removed,” he said.

Questions remain

Of course, today, March 1st, other changes to the PPP program that the Biden government announced last week will come into effect. Some student loan borrowers, lawful foreigners, and individuals with certain criminal records can now apply for unsuccessful loans.

Still, there are more questions for sole proprietorships at the time of application, especially those who have already approved a loan but would get more under the new formula. As of now, there is no procedure to change a loan that has been distributed or to withhold a currently pending application.

“All the unknowns right now,” said Alex Cohen, CEO of Liberty SBF.

If you’re a small business with a history about PPP, send an email to Carmen Reinicke at

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