PPP Loans: A Stimulus Check For Your Business

THE GOVERNMENT WANTS TO PAY YOU!!!

No, this is not a scam. This is legit!

So if receiving some free money will help your small business… you’re going to want to continue reading!

WHAT IS IT?

The Payroll Protection Program (PPP) is a part of the stimulus bill that was passed last spring – otherwise known as the CARES Act Initiative. While in a technical sense it is a “loan”, it can be fully forgiven if used for qualifying expenses like payroll, rent, and utilities. Since it can be fully forgiven, I find it’s more helpful to think of it as a grant with stipulations.

WHO QUALIFIES?

The requirements to qualify are super simple!

You need to have been in business since at least February 15, 2020

You need to have had sales (any kind of sales, product or service)

You need to still be in business

You need to have less than 500 employees

HOW MUCH CAN I QUALIFY FOR?

If you are an S-Corp, your calculations will be determined based on payroll that you paid in either 2019 or 2020.

If you are a Schedule C business – independent contractor, sole proprietorship, or LLC who has not elected S-Corp status – new calculations were released at the beginning of March 2021.

Based on the new calculations, you potentially qualify for even MORE money than you did previously!!

The calculation used to be based on net income and the new calculation is based on sales.. AKA your expenses have no determination on your loan amount now.

THIS MEANS YOU ARE NOT LIMITED BY YOUR EXPENSES!

Previous calculation = net income / 12 x 2.5 months + employee payroll (if any)

New calculation = gross receipts / 12 x 2.5 months + employee payroll (if any)

For these calculations you can use either 2019 or 2020 numbers, whichever will benefit you the most.

WHAT INFORMATION DO I NEED?

Each application is different, but most require these 3 things…

A copy of your business tax return and/or a profit and loss statement
(either your schedule C, 1120S, or 1065)

Proof that your business has been open since February 2020
(If you have a copy of your business registration, you can attach that. Otherwise, you can use a bank statement from January or February 2020)

A copy of a government issue ID
(A driver’s license works great)

As soon as you have those things gathered, RUN! Applications close on March 31st and all PPP funds are dispersed on a first come, first serve basis. I don’t want you missing out!

*Note: This Senate just voted to extend the deadline to May 31!

HOW IS IT FORGIVEN?

You have 24 weeks to use the funds you receive and as long as you use the funds on qualified expenses, the loan will be fully forgiven!

At least 60% of the funds must be used for payroll, (though you can also decide to use the full 100% for payroll if you choose to!)

The remaining 40% can be used to pay benefits, rent, utilities, mortgage interest, and a few miscellaneous expenses like software, accounting & HR needs.

WHERE CAN I APPLY?

Since the PPP deadline is approaching quickly, some banks have decided to close their applications early to give themselves sufficient time to process the applications already received. Luckily there are still a handful of lender processing applications:

WHAT IF I NEED EVEN MORE MONEY?

PPP is NOT the only option of government funding that’s available. There are multiple other options including a second round of PPP, EIDL loans, and EIDL targeted loans. Let me briefly cover these additional options…

PPP ROUND 2

If you can answer “yes” to the following 3 questions, then you qualify for a second round of PPP!

Does your business have less than 300 employees?

Can you demonstrate at least a 25% reduction in annual gross receipts in any 2020 quarter as compared to the same quarter in 2019?

Have you used (or plan to use) all of your first PPP loan by the time you receive the second round of PPP funds? (this means there has to be at least 8 weeks between when the first PPP was deposited and when you intend to receive the second deposit)

To apply for a second round of PPP, I recommend that you use the same lender who funded your round 1 PPP. They will require less documentation (since they already have all your information) which usually makes for shorter processing times.

EIDL LOAN

You are eligible for this loan if your small business is unable to pay its ordinary and necessary operating expenses. This would qualify you as experiencing “substantial economic injury”, thus the name of the loan.

Before we get deep into the details, I want to be sure to make it clear that this option is a loan – and not a forgivable loan like PPP. (That doesn’t mean it’s something to automatically write-off or avoid though! I genuinely believe that loans can be an extremely helpful tool for your business if used wisely).

Here’s a quick summary of the EIDL Loan:

Fixed interest rate of 3.75%

Collateral is not required for loans under $25,000

Funds can be used to pay for any normal operating expenses (cannot be used to fund expansion)

30 year loan. Payments do not need to be made within the first year but interest will accrue during this time

If you feel your business would benefit from this, I definitely encourage you to apply!

You can access the application here:

EIDL TARGETED ADVANCE LOANS

The EIDL Targeted Advance is a program that provides additional support to small businesses in low-income communities. Advance funds of up to $10,000 are available for applicants who previously applied but were denied due to the lack of available program funding, or to those who were accepted but received a lesser amount.

To qualify for this secondary loan you must be located in a low income community and be able to prove a 30% reduction in revenue during an 8-week period beginning on March 2, 2020, or later. You can see if your area qualifies with the SBA as a low income community using this map here:

Important to note is that the Targeted EIDL Advance is essentially considered a grant, as it is forgivable funding! You do not need to do anything to receive these funds (other than apply for the initial EIDL loan mentioned above). If you qualify, SBA will reach out to you via an official government email.

WHERE DO I FIND OUT MORE INFORMATION?

I’m ALL about keeping my people informed. In a totally non-spammy kind of way of course. After all, my email list is only valuable if you actually read the emails and no one is going to read the emails if I’m always blowing up your inbox! So, if you’re wanting updates on PPP, EIDL, tax law changes, important deadlines, and other noteworthy announcements, sign up HERE.

If you want a place where you can ask questions and not just have a one-sided conversation with an email list, join my membership, The Cash Club!! Within the group, we answer all your questions (post at any time!), you get discounted 1:1 time with accountants, and we offer monthly trainings on important topics like money mindset, taxes, pricing your services, bookkeeping and more. It’s the perfect place for small business owners who DIY their accounting to get the support they need from a full-time accountant without the price tag.

Also, my friend Jamie Trull, runs an amazing Facebook group that I highly recommend checking out. She has SO many videos on PPP and offers great advice. The Facebook group is free and easy to join. You can join the community here!

Last but not least, if you’re wanting to read more in depth details, I recommend turning to the SBA’s website:

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