Today I’m going to help you get funds available to you through the Paycheck Protection Program (PPP), part of the coronavirus stimulus package. I urge you to APPLY TODAY. These loans are FORGIVEABLE. In other words, they can turn into grants. And you’re almost certainly eligible if you own a small business or are self-employed or an independent contractor.
Remember: Just for the time being, I am doing a Facebook Live Monday to Thursday at 1pm EDT/10am PDT on my Facebook page to keep you updated and answer questions. And if someone forwarded you this newsletter, you can sign up here.
PPP is designed to ensure that people who work in small businesses—including the owners and sole proprietors—can keep getting their income.
THE LOAN IS FORGIVEABLE—IN OTHER WORDS IT TURNS INTO A GRANT—IF YOU USE AT LEAST 75% OF THE MONEY FOR PAYROLL, INCLUDING TO PAY YOURSELF.
Here are a few specifics:
- Apply through your own bank. The banks are going to be overwhelmed, and many are only serving existing customers.
- DON’T WAIT. The money may run out.
- The amount you can get is 2.5 times your average monthly payroll costs.
- The interest rate is 1% and the term is 2 years, with no payments necessary for six months.
- Both small businesses and the self-employed are eligible. You don’t need payroll employees.
- If you have 1099 workers, they don’t count toward your payroll.
GET ON THIS SOON: THE MONEY MAY RUN OUT
While $359 billion (the amount for small business support in the legislation) may seem a lot, big businesses can also get their hands on this money. Companies in the hotel and restaurant industries that have fewer than 50 employees IN ONE LOCATION can also apply for this money. And your bank may decide to cut off applications as well.
APPLYING FOR THE PPP LOAN
The rules for this loan were only finalized by the Treasury Department late Thursday night, so banks have had to scramble fast to get ready for the deluge of applications. Expect that websites may be confusing, your banker may not be clear on the rules, and lots of misinformation may be circulating. Also, the process at one bank may not be exactly the same as at another. However, banks are all using the same application questions the Treasury Department designed.
I just finished the application for the PPP forgiveable loan program on my own bank’s website. The questions completely followed the questions on the federal questionnaire that you can find here. Use that so you can see what you need to answer in the form. The form is very, very easy.
If you are self-employed, with yourself only on your “payroll,” basically, all you need to know is your social security number or EIN, and your annualized “payroll costs” (see below). The wording may be aimed more at businesses with W2 employees, but the PPP loan is also available to you.
IF YOU ARE THE ONLY “EMPLOYEE,” YOU WILL NOT HAVE TO PAY THIS LOAN BACK IF YOU USE THE MONEY TO PAY YOURSELF IN THE EIGHT WEEKS AFTER YOU GET THE LOAN.
Now, here are some things to know/consider…
- The amount you can request is 2.5 times the AVERAGE monthly “payroll expenses”—which includes ALL of the following: whatever you were paid/earned (if you get 1099’s that’s particularly easy to fill out but if you don’t, figure out your total gross income), plus group health insurance costs, plus any retirement contributions. Figure out what the total amount is, then divide by 12. You can—and should—apply for 2.5 times that amount.
- If you are self-employed, and that amount is less than $9600, you may be better off with unemployment (the $600 per week for 4 months the federal government has authorized). But that may take longer or be more complicated. Your decision.
- The Association of CPAs say that GROSS payroll expenses—including federal payroll taxes—are used in figuring out the amount.
- If you’re filling out the form online, I suggest taking a pic or screen shot of every page that you’ve filled in.
- Sole proprietors, self-employed, and independent contractors ARE DEFINITELY INCLUDED in this program.
- Number of jobs can be ONE, if you are a sole proprietor or self-employed.
- 1099 workers are not included in YOUR payroll costs. They need to apply for themselves (or apply for unemployment). However, if you receive 1099’s, they will be good as a basis for your payroll.
- You will be forgiven for the amount of the loan you spend in the 8 weeks following the date you receive the loan on payroll expenses (which include all of the above), plus rent plus utilities. But payroll must be at least 75%. So you would need to pay your employees and/or yourself at least 75% of the amount (it could be 100%) of the loan in the 8 weeks following getting the loan. I recommend you have a paper trail to support that—such as payroll records or writing out a check to yourself each month, with a memo line of “payroll” or “monthly salary” or some such.
- If you earn more than $100k a year, you are limited to $100k for the basis of figuring out your individual salary.
Also, the interest rate on this loan is only 1% and you have no payments required for 6 months and up to 2 years to pay it back. So even if you don’t get it all forgiven, it’s a great loan.
I’ll take questions about these programs during my Facebook Live sessions, M-Th, 1pm EDT/ 10am PDT. Go here to join or to watch the recording later.
OK. Go get your money.
Copyright Rhonda Abrams, 2020