Paycheck Protection Program (PPP) Loans Opening Soon

We have your latest PPP update.

PPP Loan applications will open on Monday, January 11!

The U.S. Small Business Administration will be reopening its forgivable loan program for new borrowers and second rounds for certain existing borrowers.Initially, only community financial institutions — this includes banks and credit unions that lend in low-income communities — will be able to offer PPP loans on Monday, Jan. 11 to first draw borrowers, and second round PPP loans on Wednesday, Jan. 13. The program will reopen to all participating lenders shortly thereafter.

Most banks will only begin their lending with existing clients. Reach out to YOUR bank right away to see if they have an application that you can begin to fill out. We’ve heard that most banks won’t open up their lending to “new” clients until maybe March.

The main takeaway is that any business that did not receive a PPP loan previously, or those businesses that experienced a 25% reduction in revenue in one quarter of 2020 over 2019, can apply for this new round of PPP. Even more helpful, businesses, sole proprietors, and independent contractors applying for loans of $150,000 or less and based on the same calculation as round one—2.5 times one month of 2019 payroll—do not have to submit new documentation if applying through the same lender. The new regulations do give lenders the ability to request additional documentation from borrowers if they deem it necessary.

If you don’t have employees, you can still apply for a PPP loan! Also, if you have 1099 subcontractors, they are eligible to apply for their own PPP.

For self-employed individuals without employees

1. Find or complete your Form 1040, Schedule C. 
2. Locate your net profit on line 31. The max for PPP loans is $100,000 annualized income, so cap any net profit over $100,000 for the following steps. 
3. Divide this total by 12 to find your average monthly net profit. 
4. Multiply by 2.5 to determine the PPP loan amount to request to cover 2.5 months of average profits (“payroll”) for a self-employed business.
5. Gather documentation to substantiate this income – 2019 IRS Form 1099-MISC detailing non-employee compensation received (box 7), invoice,  or bank statement showing self-employment, and a 2020 invoice or bank statement covering February 15, 2020 at the latest.

For self-employed individuals with employees

1. Find or complete your Form 1040, Schedule C. 
2. Locate your net profit on line 31. The max for PPP loans is $100,000 annualized income, so cap any net profit over $100,000 for the following steps. If less than zero, set to zero. 
3. Add gross wages & tips for employees residing in the US using 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c- column 1).
4. Add pre-tax benefits to employees, such as health insurance. 
5. Cap all individual employee’s wages, tips, and benefits at $100,000.
6. Add employer health insurance and retirement contributions (found on Form 1040 Schedule C line 14 and 19, respectively), and any state and local taxes on employee compensation that apply to your business. 
7. Divide this total by 12 to find your average monthly net profit. 
8. Multiply by 2.5 to determine the PPP loan amount to request.
9. Gather documentation to substantiate this income – 2019 Form 1040 Schedule C, Form 941 and state wage unemployment insurance tax forms from each quarter in 2019 (or tax forms/payroll processor records containing similar information), evidence of any retirement and health insurance contributions, and an invoice or bank statement demonstrating business in operation before February 15th, 2020.

Source: Divvy

For more information on the most recent changes, read the U.S. Chamber of Commerce guidance.