PPP Formulas Meant Some Sole Proprietors Got Loans of $1

By:
Chris Gaetano
Published Date:
Jan 11, 2021
Formulas for how Paycheck Protection Program (PPP) loan amounts are calculated led to a number of sole proprietors getting absurdly small loans, sometimes as little as one dollar, and the fear is that this will happen again in the program's second round, according to the New York Times.

The problem is that, in the absence of employees whose payrolls need protection, rules hastily prepared for sole proprietors require that the loan amount be calculated according to the sole proprietor's annual profit. Since these businesses often operate with razor-thin margins, there was often little profit to include in the loan application. The Times noted one example of a freelance photographer who netted $458, which the government treated as her annual salary and thus sent her a loan of $95 (minus bank fees). Similarly, a college consultant, once the Small Business Association looked at her net profits, gave her a loan of $13. A Texas chiropractor got the worst of it, receiving a PPP loan of only $1.

The Times said about 300 businesses in total had this happen to them, and noted that the program, which was generally aimed at businesses with payrolls, made sole proprietors basically an afterthought, hence the hastily constructed rules.

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