Disclaimer: The PPP was created and has been intertwined with several stimulus bills, 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 -- 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that we’ll see significantly more changes, but please be aware of the possibility that this information will become outdated.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. 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 were freelancing / in business before Feb 15, 2020.
- You must have had revenue in your freelance / self-employed / Schedule C business on your 2019 or 2020 tax returns. For the purposes of this guide, your revenue = freelance income, 1099-MISC income, 1099-NEC income, or any other untaxed income sources.
How much can I apply for?
If you have never received PPP funds before, use this calculation (the SBA calls this your "First Draw"):
- Pull out your 2019 + 2020 tax returns.
- If you haven’t completed your 2020 tax return yet AND you had more revenue in 2020 than in 2019: you should file your 2020 taxes before applying for the PP to receive the maximum benefits. 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 7 labeled “Gross Revenue”.
- If this amount is $0 or negative, you do not qualify
- If you do not have a Schedule C, you do not qualify
- Time for some math:
- Step 1: Find Schedule C Line 7
- Step 2: Line 7 ÷ 12
- Step 3: Multiply the Step 2 result by 2.5
- If the result is greater than $20,833: you qualify for the max $20,833. Otherwise, the result to Step 3 is your maximum PPP loan amount.
- Here's an example:
- Step 1: Line 7 = $10,000
- Step 2: $10,000 ÷ 12 = $833
- Step 3: $833 * 2.5 = $2,083
- $2,083 would be your maximum PPP loan amount.
If you have received PPP funds before, use this calculation first (the SBA calls this your "Second Draw"):
- You'll need to show a 25% reduction in revenue in at least 1 quarter in 2020 to qualify for additional PPP funds. Break out your 2019 and 2020 revenue by quarter.
- For each quarter, do the following math:
- (2019 Q1 - 2020 Q1) / 2019 Q1
- (2019 Q2 - 2020 Q2) / 2019 Q2
- (2019 Q3 - 2020 Q3) / 2019 Q3
- (2019 Q4 - 2020 Q4) / 2019 Q4
- If any of the individual results are greater than 25%, you qualify for additional PPP funds. Use the same equation above for "First Draw" loans.
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 March 31, 2021. 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:
- Bank of America: Closed
- Capital One: Closed
- Chase: Until March 26 (however, they are not accepting applications with gross revenue. We don't recommend using Chase right now.)
- Citibank: Closed
- PNC Bank: Closed
- TD Bank: Closed
- US Bank: Closed
- Wells Fargo: Closed
- 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 or 2020 tax return.
- The calculated maximum loan amount.
- State issued ID or other personal identification (varies by bank on what is accepted).
- If it's your second draw, you'll need your 2019 - 2020 revenue per quarter and supporting documentation
How do I get my loan forgiven?
As long as you appropriately calculated your maximum PPP loan amount earlier, you should be confident that the full amount will be forgivable.
Important note: You can't receive full unemployment benefits while "paying yourself" with the PPP loan.
As always, if you have any questions about the PPP application or tax stuff in general, email us at email@example.com!