PPP loans themselves were not taxable income to businesses. Congress subsequently made the loans forgiven without tax consequence if the funds were used for the specified uses agreed to upon issue. Businesses were able to use PPP funds for expenses like payroll, rent, mortgages, business operating expenses, etc.
A Schedule C self-employed person does not receive compensation or payroll or wages from the Schedule C activity. You can withdraw funds anytime you wish, it's your business - your withdrawals are neither taxable events nor business expenses.
Your taxable income at years end is the bottom line. The PPP funds were intended to be nontaxable funds to the business to be used for specified business expenses. It would show on the balance sheet. It would not appear anywhere on Schedule C. The expenses that were paid for using PPP funds appear on Schedule C along with all other ordinary and necessary expenses.
