Disclaimer: The PPP is part of the CARES Act stimulus package, which means it’s controlled directly by Congress through legislation. Due to this, the program has been modified dozens of times since it was first introduced a few months ago -- mostly for the better. With the deadline right around the corner, it’s unlikely that we’ll see significantly more changes, but please be aware of the possibility that this information will become outdated.
Step-by-Step Guide: Applying for the PPP
Here’s the Brass Taxes step-by-step guide for determining if you will qualify, how much you can get, and how to make sure it’s forgiven:
- First off, is this application process worth my time?
- Who can apply?
- Will I qualify?
- How much can I apply for?
- How do I apply?
- What will I need to apply?
- How do I get my loan forgiven?
First off, is this application process worth my time?
If you’ve been affected by COVID-19 and qualify, you may receive a 100% forgivable loan ranging in value from $200 - $20,000+ (based off your 2019 income). The application is straightforward and can be completed within a few hours. We promise that it's worth investigating.
Who can apply?
- Self-Employed Individuals / Freelancers / Contractors (Sole Proprietorship)
- Single Member LLCs
Businesses and nonprofits with under 500 employees can also qualify, but this guide is catered to the self-employed individuals! Email us at email@example.com if you are a business (S-Corp / Partnership / Multi-Member LLC) for more information.
Will I qualify?
Here’s what it takes to qualify:
- You must be negatively impacted by the COVID-19 pandemic.
- You must have had a profit in your freelance / self-employed / Schedule C business on your 2019 tax return.
How much can I apply for?
- Pull out your 2019 tax return.
- If you haven’t completed your 2019 tax return yet, you will need to do so before applying for the PPP. Email us at firstname.lastname@example.org to make an urgent appointment.
- Find the form labeled “SCHEDULE C” in the upper left hand corner. The Form will have the header, “Profit or Loss From Business”
- Find the amount on Line 31 labeled “Net Profit or Loss”.
- If this amount is $0 or negative, you do not qualify
- Time for some math:
- Step 1: Find Schedule C Line 31
- Step 2: Line 31 ÷ 12
- Step 3: Multiply the Step 2 result by 2.5
- The result to Step 3 is your maximum PPP loan amount.
- Here's an example:
- Step 1: Line 31 = $10,000
- Step 2: $10,000 ÷ 12 = $833
- Step 3: $833 * 2.5 = $2,083
- $2,083 would be your maximum PPP loan amount.
Can’t find your Schedule C? Email us at email@example.com for help.
How do I apply?
You can apply for the PPP through most banks, credit unions, and other financial institutions. The deadline for applications to be processed is August 8, 2020. As we approach that deadline, many banks including the ones listed below will stop accepting applications.
Given the upcoming deadline, we recommend pursuing more than one funding source until you know one has been submitted to the SBA. It's difficult to know the processing time backlog at each bank, so this will help make sure your application is processed by the deadline. The first application to get through should be accepted and all others should be automatically rejected.
There are 4 viable avenues for applying. We recommend considering these options in order:
- If you have a business bank account that was opened before February 2020, apply through that bank. Info for a few major banks below:
- If you have an account at a local bank or credit union, call them to see if they could process your application. Timing is the biggest issue right now, and a local relationship could make this a lot easier!
- Use a bank that accepts applications from non-customers or new customers (you may need to open a checking account to apply):
- Use a company that is partnering with one or multiple banks to process the loans. Anecdotally, we have heard mixed reviews from clients -- some good, and some not so good -- on the speed and ease of getting their application through these sources:
What will I need to apply?
- Schedule C from your 2019 tax return.
- The calculated maximum loan amount.
- State issued ID or other personal identification (varies by bank on what is accepted).
How do I get my loan forgiven?
Generally, PPP funds must be spent on business expenses to qualify for full forgiveness. This includes paying yourself for 2.5 months and home office expenses (rent utilities) in addition to other expenses normal for your business. As long as you appropriately calculated your maximum PPP loan amount earlier and your income was truly affected by COVID-19, you should be confident that the full amount will be forgivable.
For tracking the payments to yourself (aka your "salary"), keep track of your personal expenses using your bank statements and / or use self-written checks (if you have a separate business account).
Important note: You can't receive full unemployment benefits while "paying yourself" with the PPP loan.
We're working on a calculator for you to track your expenses and calculate your forgiveness. Check back here soon!
As always, if you have any questions about the PPP application or tax stuff in general, email us at firstname.lastname@example.org!