New PPP Rule Is Good News For Service Business Owners If Your Loan Is For $50,000 or Less

The Payroll Protection Program (PPP Rule) has been a rollercoaster for service business owners. It’s been both useful and frustrating, depending on your experience with the platform and how many questions you had about the program.

With the rules constantly changing it can be hard to keep up, but as of right now we’ve got some good news for you if your Payroll Protection Program loan is for less than $50,000.

Under the new rules, you escape the most difficult part of the loan forgiveness if you had to consider your employees, and you may now qualify for more forgiveness than you would before.

Before the Change

Before the $50,000 or less rule change, you had to qualify for certain exceptions or you suffered a reduction in the amount of loan forgiveness you would have access to.

You had to have cut annual salaries/hourly wages by more than 25% or reduced the average number of employees or average hours paid.

If that wasn’t the case, then less loan forgiveness for you.

calculating PPP Rule

After the Change

With the new rule change, as long as your PPP loan is $50,000 or less, you don’t have to worry about the rules regarding employees. Instead, you qualify for full forgiveness of your PPP loan if:

  • your PPP loan is for $50,000 or less,
  • you spent the PPP money on costs that are eligible for forgiveness,
  • and at least 60 percent of the forgiveness is for qualified payroll costs (including defined payroll for owners).

This rules change makes it much easier for service business owners to qualify for full forgiveness of their PPP loan if it’s under the $50,000 threshold.

For example, if you obtained a loan of $34,000 based on your 2019 Schedule C income and laid off your part-time worker without being able to rehire them, you would qualify for 100% forgiveness if you used 60% of that money ($20,400) to cover your own salary as well as rent and utilities. 

One thing to note here is that you do not count as an employee of your Schedule C service business in that example since you don’t receive W-2 income. But the PPP rules consider your Schedule C profits as your payroll for PPP loan purposes and they cap the forgiveness at a maximum of $20,833 when that income is $100,000 or more.

Ultimately, this rule change is great news for service business owners that have a Payroll Protection Program loan of $50,000 or less as it makes it easier to get the whole loan forgiven without having to jump through so many hoops.


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