payroll protection program (PPP)

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

Paycheck Protection Program resumed January 11, 2021

March 2021 Update
SOLE PROPRIETORS/SELF-EMPLOYED PPP CALCULATIONS

For anyone still applying to the Paycheck Protection Program Round 2 (PPP2), the SBA is now allowing Sole Proprietors/Self-Employed to calculate their PPP loans using Gross Revenue. The current deadline for your lender to submit to the SBA is Wednesday, March 31st. We recommend you apply ASAP. 

 Who Can I Apply To?

• The following list of lenders are ones we have confirmed are still accepting applications from the public and are using the Line 7, Gross Revenue Rule:

• Cross River: https://www.crossriversba.com/
• BlueVine: https://www.bluevine.com/paycheck-protection-program/
• Lendistry: https://lendistry.com/partner/pidc/
• PayPal: https://www.loanbuilder.com/ppp-loan

• This list is not exhaustive, there may be other lenders. However, many lenders are refusing to use the new rules so please confirm if they will allow you to use Line 7 of your Schedule C. Do not complete and submit your PPP application if they ask for your Line 31. Otherwise, you will receive the smaller Net Revenue amount. 

How Do I Take Advantage of This?

• Originally, Self-Employed could only use Net Profit/Loss (Line 31 of your Schedule C) to calculate owner’s “salary”. This punished entrepreneurs who operated at a loss or a slim margin in 2019. 
• You can now use your Gross Revenue (Line 7 of your Schedule C) to calculate the owner's portion of the PPP calculation 
• This applies to all who file a Schedule C (Form 1040): Sole Proprietors with or without employees, 1099 Independent Contractors, Self-Employed, etc. 
• If you thought you were not eligible for the PPP because of your Net Profit/Loss, you may be eligible now!

But I Already Received PPP Funds With Only Net Revenue. Can I Expand My Loan?

• Currently, the SBA has ruled that they will not allow you to expand your PPP loan if you have already received it. 
• Several small businesses and community organizations are voicing their outrage on this SBA ruling. We encourage you to contact your U.S. Representative to make them aware of this punishing of businesses who applied early.

Update February 22,2021
The White House has announced improvements to the Paycheck Protection Program (PPP) to ensure the loan program better reaches the smallest businesses and those owned by people of color and particularly those who struggled to access it during the first rounds of funding last year. Please read below for a list of key changes that are being implemented to the program to see if it might benefit you and your business.

The Administration is implementing the following changes to PPP:

• Businesses of 20 Employees or Less Will Receive Priority Processing for 14 Days. 
  • Starting Wednesday 2/24/2021 and ending Wednesday 3/10/2021, the SBA will only process applications from businesses of 20 employees or less, allowing them to “cut in line” and receive their loans in a timely manner. 
  • All of you who are over 20 employees can still be processed by the March 31^st deadline if you apply, you will simply be processed behind the smaller businesses.
• Sole Proprietors May Now Calculate PPP Loans Using Gross Revenue. 
  • Originally, Sole Proprietors could only use Net Revenue (Line 31 of your Schedule C) to calculate owners “salary”. This punished entrepreneurs who operated at a loss or a slim margin in 2019. 
  • You can now benefit from using your Gross Revenue if you are a Sole Proprietor, both for those with employees and without.
• Non-citizens with Individual Taxpayer Identification Numbers are Eligible to Apply for PPP. 
  • Noncitizens with lawful immigration status have been and still are eligible to apply for the PPP.
  • Any business owners who hold green cards or visas are able to apply to PPP by using their Individual Taxpayer Identification Number.

If you under 20 employees and have not yet applied, we highly recommend applying within the next week so that your application can benefit from “cutting in line” during this 14 day period. Sole Proprietors who were originally ineligible for a Net Profit are also highly recommended to apply under the new Gross Revenue ruling.

Please click on the following links to access our guide to the PPP2 as well as the three (3) other major COVID-19 relief programs available to you:

• SBA Paycheck Protection Program Round 2 (PPP2) – CLOSES MAR. 31
• California Pandemic Unemployment Assistance (PUA) – ONGOING – Unemployment to those not usually eligible for unemployment
• SBA Economic Injury Disaster Loan (EIDL) – ONGOING – Non-forgivable loan of low-interest working capital
• CA IBank California Rebuilding Fund (CRF) – ONGOING – Non-forgivable loan of low-interest working capital

When Do I Apply?

• Friday, January 15^th: Smaller Credit Unions and similar lenders with $1 billion or less in assets begin accepting applications
• Tuesday, January 19^th: All participating PPP-eligible lenders begin accepting applications
• The deadline will be Wednesday, March 31^st, or when funds are depleted 

How Do I Apply?

• Applications for PPP2 are made through private financial institutions approved for lending by the SBA (banks, credit unions, and financial technology companies)
• You will complete the entire application online through these private lenders’ websites.

Who Should I Apply Through?

• If you had a good experience with a lender last year for PPP1, you may want to stick with them
• If a larger bank ignored you and caused your application to be delayed or even canceled, you may want to try a smaller credit union focused on the community
• You do not need to have an existing bank account in order to apply with a lender. However, some banks may choose to prioritize their existing customers.
• We have found that applying through Financial Technology (“FinTech”) company lenders have been the most responsive to “micro” small businesses under 50 employees. Most will begin accepting applications on Tuesday, January 19^th. These include but are not limited to companies such as: 
  • BlueVine: https://www.bluevine.com 
  • Cross River: https://www.crossriversba.com/
  • Funding Circle: https://www.fundingcircle.com/us/
  • Fundbox: https://fundbox.com/paycheck-protection-loan/
  • Kabbage: https://www.kservicing.com/ppp-loan/
  • On Deck: https://www.ondeck.com/paycheck-protection-program-loans-ppp
  • Paypal: https://www.loanbuilder.com/ppp-loan-support
  • Square: https://squareup.com/us/en/capital/sba-ppp-loans

Who Is Accepting Applications Right Now?

Please Note: This list is not exhaustive. Many more lenders will be available over the next few days. But here are a few small lenders already accepting PPP applications and are confirmed to not require a pre-existing banking relationship:

• American Lending Center: https://americanlendingcenter.com/
• Ampac Tri-State CDC: https://ampac.com/paycheck-protection-loan-application/(currently prioritizing small businesses and self-employed individuals)
• CenterStone SBA Lending, Inc: https://teamcenterstone.com/about-2-2/
• GBC International Bank: https://www.gbcib.com/a_contact.htm
• Harvest Small Business Finance, LLC: https://www.harvestsbf.com/ 
• Mechanics Bank: https://www.mechanicsbank.com/Business-Commercial/Business-Solutions/PPP-CARES-Act(launching Tuesday, Jan 19th)
• Neighborhood National Bank: https://www.mynnb.com 
• SunWest Bank: https://www.sunwestbank.com/sba-ppp/
• United Business Bank: https://www.unitedbusinessbank.com/loans-credit/business-loans/paycheck-protection-program.html

Second-draw PPP loans

If you received a PPP loan in 2020, you can apply for a “second-draw” if you meet all criteria below:

• Have 300 or fewer employees.
• Used or will use the full amount of your PPP1 loan before receiving PPP2; used PPP1 loan only on eligible costs.
• Suffered a 25% or more drop in revenue when comparing any 2020 quarter to the same 2019 quarter.
• (you do not need to have your PPP1 loan forgiven yet to receive PPP2)

First-draw PPP loans

If you have not received a PPP loan before, you can apply for a “first-draw” if you meet all criteria below:

• Established on or before Feb 15, 2020 (“pre-pandemic”)
• Have 500 or fewer employees.
• Are one of the Eligible Organization Types.

Eligible Organization Types 

• Corporations (C-Corp, S-Corp; LLC; etc.)
• General Partnership
• Sole Proprietorship
• Independent Contractor
• Self-employed Individual
• 501(c)(3) nonprofit
• 501(c)(6) nonprofit
  • 501(c)(6) must be 300 or fewer employees
  • 501(c)(6) lobbying activities cannot exceed $1 million or 15% of the organization’s total activities
• 501(c)(19) veterans organization
• Tribal Business

Calculating Total Loan Amount

• Maximum loan amount is 2.5 times your average monthly payroll expenses for the year 2019.
• This includes any retirement and health insurance contributions.
  • As a business or nonprofit with employee payroll, most lenders will calculate your average monthly payroll through your 2019 IRS form 941.
  • As an independent contractor, most lenders will calculate your average monthly payroll through your 2019 IRS form 1099.
  • As a self-employed individual, most lenders will calculate your average monthly payroll through your 2019 Schedule C (also referred to as Form 1040).
• Calculating Seasonal Businesses
  • For seasonal businesses, you may calculate average monthly payroll using the following periods:
    • February 15, 2019 – June 30, 2019
    • March 1, 2019 – June 30, 2019
    • January 1, 2020 – February 29, 2020 (only if you were not in business from February 15, 2019 – June 30, 2019)
• Increased Assistance for Accommodation and Food Services Businesses
  • For borrowers in the Accommodation and Food Services sector, the maximum loan amount for a Second Draw PPP Loan is increased to 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.
    • Applies to all businesses with a NAICS Code beginning in “72”. (click HERE to explore the eligible types of businesses) 
    • Only applies to Second-draw PPP loans, not First-draws.

Eligible Costs

• Payroll (must make up at least 60% of all costs)
• Rent
• Mortgage interest
• Utilities
• Certain costs to comply with COVID-19 federal health and safety guidelines. (facility modification costs, employee PPE, etc.)     
• Certain property damage costs related to vandalism or looting due to public disturbances in 2020 that were not covered by insurance.
• Costs to pay suppliers that are essential to your current operations.
• Certain operating costs to purchase business software or tech services that allow you to perform socially distanced operations. (product or service delivery; digital or online sales; digital payment, payroll, human resources, accounting, inventory, records, etc.)

What Do I Do If My Employees Won’t Come Back?

• The purpose of the PPP is to provide payroll for your workforce. You must spend at least 60% of your PPP funds on payroll. 
• Your business does not have to be open to use PPP funds. You are allowed to pay employees to simply shelter in place if you are unable to open. 
• If an employee cannot or will not come back, you should document a letter or email offering to rehire them, and document their refusal.
  • Note: it is possible that this refusal could disqualify an employee from unemployment benefits. 
• If you have extra PPP funds because an employee won't come back to work, you can spend it on the following:
  • Hiring a new employee
  • Increasing the payroll of your current workforce
  • Give back this portion of the funds to the SBA
  • Keep this portion of the funds as a 1% loan

Full Forgiveness Terms

The 1% interest, 5-year loan will be fully forgiven if you meet all criteria below:

• Must spend funds once you receive them over a “covered period” of 8- to 24-weeks.

Must spend funds on eligible costs only.

• Must spend at least 60% of the funds on payroll.
• Must rehire all of your employees at their normal rates. (see exceptions explained above)

Simplified Forgiveness Process

• This new process applies to both old and new PPP loans.
• If you receive a PPP loan of $150,000 or less, the forgiveness process will include a signed certification that is not more than one page in length.
• The SBA has yet to create the simplified application form but must do so by Jan. 20, 2021.
• You are required to retain relevant records for four years, as the SBA reserves the right to audit loans to check for fraud.

Other Important Changes to PPP

• Congress made clear that a forgiven PPP loan is completely tax-exempt and is not taxable income.
• Eligible business costs paid for with PPP funds can now be claimed as business expenses in your taxes.
• You are now allowed to apply for both a PPP loan and take advantage of Employee Retention Tax Credit (ERTC).
• Employee health insurance benefits are now included in PPP payroll calculations. (including life insurance, disability benefits, vision, dental, etc.)
• If you received PPP and the EIDL Advance (emergency SBA funds of $1,000 per employee), you do not have to reduce your PPP loan forgiveness by the EIDL Advance. 
• Set-Asides for minority, underserved, veteran, and women-owned businesses.

Out of the $284 billion total, there will be certain pots of PPP funds set aside for new and smaller borrowers, and for community and smaller lenders:

• $15 billion across first- and second-draw PPP loans for lending by community financial institutions;
• $15 billion across first- and second-draw PPP loans for lending by insured depository institutions, credit unions, and Farm Credit System institutions with consolidated assets of less than $10 billion;
• $35 billion for new first-draw PPP borrowers; and
• $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods. The SBA has determined that at least 25% of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods.