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The Small Business Administration (SBA) sent a message through its SBA Connect platform alerting Schedule C filers, which cover sole proprietors and single-member limited liability corporations, that the agency will soon issue an interim final rule with a new definition of "payroll costs" for paycheck protection program (PPP) loans.

The new payroll costs definition will only be available for PPP loans approved after the effective date of the IFR. The SBA will release new application forms – for both first- and second-draw loans – that Schedule C applicants must submit to use the new definition.

For Schedule C filers who have already submitted a PPP loan application using previous forms, there are several considerations the SBA flagged in the alert:

• For forms submitted but not yet approved, the lender may withdraw the application from the platform.
• For applications that have been approved but funds not yet disbursed, the lender may cancel the loan and the borrower can apply for a new loan using the new application form once available.
• For loans that have been disbursed but lenders have not yet filed the related Form 1502, the lender may cancel the loan and the borrower can repay it and apply for a new loan using the new application form.
• For loans that have been disbursed and Form 1502 filed, the loan cannot be canceled.

Loans using previous versions of the applications cannot be increased to take advantage of the new definition. During a call monitored by NAFCU last week, the SBA advised lenders with pending Schedule C applications to hold off on processing them until the new application forms are available.

The SBA is currently only processing PPP applications for small businesses with fewer than 20 employees through March 9 as part of the Biden administration's efforts to promote equitable access to capital.