The Paycheck Protection Program
The Paycheck Protection Program
PPP is available to small businesses, sole proprietorships, and the self-employed.
Apply with a certified SBA lender to take advantage of this (possibly) forgivable loan
This is new legislation and any questions should be directed to your lender
There’s buzz across the nation about a new program that was created after President Trump signed the CARES Act; the Paycheck Protection Program. If you are a business owner, own a sole proprietorship, or are self-employed you may be very interested in the loan opportunity this opens up for you to get your business through this challenging time.
Through the Paycheck Protection Program, up to $349 billion can be distributed to small businesses in forgivable loans. These loans are meant to be used to fund payroll during the COVID-19 crisis.
If you are interested in this program, it is important to keep in mind that this is STILL A LOAN. Even if the program indicates it can be forgiven, it is BEST to think of it and act like you will have to pay it all back once the loan comes due.
While we provide you with the most accurate and up-to-date information that we can, Good Day Accounting cannot guarantee that you will get this loan- and we can’t guarantee that you’ll be eligible for the forgiveness, either.
Still, this program was created to help small businesses; and if you’re interested, read on, as this is what we know about the program.
So What Is It?
The Paycheck Protection Program (or PPP) has been created to offer loans to small business owners impacted by COVID-19. According to the fact sheet released by the Department of the Treasury, the loan will
Be based on average monthly payroll costs, including benefits and PTO
Pay out two months of your average monthly payroll, plus an additional 25%
Be capped at $10 million dollars
Have the same loan terms (interest rates, repayment schedule) for each borrower
Have payments be deferred for 6 months
Be due in 2 years
Borrowers will be able to get these loans through certified Small Business Administration lenders.
However, the most special thing about this program is that these loans seem designed to be forgiven. According to that fact sheet, the loan amounts will be forgiven as long as
Borrowers use the money to only cover payroll costs as well as (a small percentage toward mortgage interest, rent, and utility costs) over the 8 week loan period
Employee and compensation levels are maintained
How Do I Apply?
According to the fact sheet, small businesses and sole proprietorships can apply through existing SBA lenders from April 3 to June 30. To do so, you will need to complete the application and submit payroll documentation to the lender.
Independent contractors and the self-employed can apply from April 10 to June 30. Like small businesses, they will need to complete the application and submit documentation of payroll expenses.
However, although April 3 was supposed to be the start date, many lenders do not yet have the guidance they need to start accepting applications, according to Forbes. When you reach out to a certified SBA lender, keep that in mind.
Here is a sample of some of the documents you might need to apply:
2019 Payroll tax and Employee reports
Business entity documentation (e.g. operating agreement, certificate of organization, bylaws, articles of incorporation)2017, 2018 and 2019 business tax returns, if applicable, or 2019 internal financial statements if 2019 tax return is not filed
Debt schedule for operating business
List of owners, with identification, of the business
What if I’m Self-Employed?
Those who are self-employed, like contractors or gig workers, can also apply for the PPP. However, it’s important to know that you cannot collect unemployment insurance AND get a loan from the PPP. If you are self-employed and are interested in the newly expanded unemployment insurance as well as the PPP, you will need to figure out which is better for you.
As someone self-employed, you may not have a payroll service to ask for documentation to provide with the loan application- so it may be best to look at your taxes for 2019, if you filed, and find your yearly income on your Schedule C. Divide that by 12, and you should have an idea of your monthly income. If you haven’t filed for 2019 yet, then it may be best to compile your 1099-MISCs and add them together, then find your monthly income based on those.
What Should I Keep In Mind?
The PPP is definitely a great resource for this challenging time, and it’s designed to help businesses keep paying their employees, and to help self-employed people stay afloat. If you want to apply for this, here are some things you should keep in mind as you do:
Despite the possibility of forgiveness, this is still a loan. There is no guarantee that the entire amount will be forgiven, so be aware of that when you apply.
The program is open for applications until June 30, but if you want to apply it’s better to do it as soon as possible. The longer you wait, the more likely it is that the pool of money will be gone.
You will owe money if you don’t maintain your staff and payroll. This includes laying off employees or decreasing their salaries or rate of pay.
Lenders may not yet be ready to accept applications. This is most likely on a case-by-case basis. You will need to reach out to lenders to see if they are accepting.
This is new legislation, and guidelines and recommendations are changing by the minute, so the information here is subject to change. Any questions or concerns you have need to be directed to your lender.
Independent contractors do NOT count as employees for the purposes of PPP loan application for forgiveness. Independent contractors have the ability to apply for a PPP loan on their own.
The changing times call for new programs- and new programs can be a bit rocky at first, but may provide the relief you need. If you think the PPP is right for you, reach out to a certified SBA lender and see if they are accepting applications to get started.