The new “forgivable” Paycheck Protection Program (PPP) loans that are available to self-employed people, small business owners, and entrepreneurs have gained a lot of attention over the past few weeks.
Anytime a small business owner can get a loan without needing to pay it back, that’s big news for sure. 🙂
We have been making extensive efforts to ensure that all Pronto Income Tax Clients are aware of your options for applying for these loans, how to make sure the loan is actually forgiven (there are “catches”), and other important details.
If you’re seeking to get GENERAL information about the PPP Program, please Google yourself silly to develop a familiarity.
In this blog post, we won’t have time to rehash all the basics, but we will provide you with a few actionable, step-by-step PPP loan tools and techniques that may be extremely helpful to our Pronto Income Tax Clients and to the small business community in general.
Keep in mind that although everything on this page is updated as of today’s writing (April 9, 2020), things are moving very quickly and you’ll need to conduct your own due diligence before applying any of this information to your particular situation, as this is NOT personalized tax, legal, or financial advice.
Spreadsheet for Calculating “Average Monthly Payroll Cost” for Self-Employed or Small Business
The most common source of confusion for PPP loan applicants has been how to calculate “Average Monthly Payroll Costs.”
With the maximum loan size for PPP loans being 2.5 times Average Monthly Payroll Costs, how you calculate this Average Monthly Payroll Costs figure will largely determine how much money you can get through the PPP loan program.
For businesses with consistent amounts of payroll costs from 2019, the calculation is fairly easy in most cases:
2019 payroll costs divided by 12 to get the monthly average, then 2.5 times that monthly average to arrive at the PPP maximum loan size.
HOWEVER, there are many businesses, such as seasonal and new businesses, who will benefit from using “alternative calculations” of Average Monthly Payroll Cost for purposes of obtaining a PPP forgivable loan.
For example, a new business not operating as of February 15, 2019 could use the net income from January and February of 2020 to determine average monthly payroll costs. If you just started your business in 2019 and/or are not showing much net income on your 2019 tax return, certainly the ability to use the net income from the first two months of 2020 could be a much more beneficial calculation than using 2019 net income, which could be minimal or even a loss in the year of a new business start up.
Here is a PPP Loan Estimator Spreadsheet we built for our clients showing 7 potential ways to calculate Average Monthly Payroll Costs.
You can download that spreadsheet (no email opt in required and no cost) by clicking here.
Keep in mind that this PPP Loan Estimator Spreadsheet is an ESTIMATOR and, again, things are changing rapidly, so you would have to work with your lender to verify the calculation methods that will be allowed for your personal situation.
Make sure that YOU take control of this calculation as an empowered business owner and get the best deal for yourself based on personal situation (rather than allowing “cookie cutter” bank application processes to dictate the amount for which you can qualify).
Step-by-Step Tutorial of Applying for a PPP Loan
The second resource we built for you is this Step-by-Step Walk Through Tutorial of Applying for a PPP Loan.
This tutorial will show you “what it looks like” to apply for a PPP Loan from the perspective of an applicant.
Again keep in mind that things are changing rapidly and this tutorial only shows the Bank of America PPP loan application process, so you have to keep in mind that your application experience could be different, but hopefully this tutorial will give you a good view on what you can expect if you apply.
How to Find a PPP Lender
With those tools above then, hopefully you feel empowered as to your options for getting a PPP loan if you need one.
Now the next step for many readers of this blog post will be a question such as:
- Where to apply for PPP loan?
- How to find PPP lender?
- How to find PPP lender that’s accepting new customers?
If you’re searching for a PPP lender, we advise you to apply with your own business bank first (meaning the bank where you have your business bank accounts and/or credit cards and/or business loan, etc.), as they will have many of the records needed to close these loans efficiently.
If you don’t have a business bank account, your business bank isn’t offering these loans, or there’s some other reason why you’re having trouble finding a PPP lender, you can use the SBA’s Lender Match Tool to find banks in your area.
We are hearing that small community banks in many cases are providing faster funding on these loans.
We have also heard of some business owners offering to switch all their existing business to a bank if they’ll get you into their “PPP Pipeline” so to speak.
Keep in mind again that nothing in this blog post should be construed as advice for your personal situation. You’ll have to do your own research to find the best option for you and your business. And always make sure you understand the terms of any loan you’re getting (for example, these PPP loans may NOT be forgiven if you spend the money on expenses that are not considered “covered expenses” under the terms of the loan).
The demand for these PPP loans has been nothing short of HUMONGOUS, so you will need to use persistence to find a PPP lender if you don’t have an existing banking relationship with a lender that’s doing PPP, or even if you do have an existing relationship it’s going to take some proactive persistence from you if you want to get a PPP loan.
Fortunately self-employed people, small business owners, and entrepreneurs are accustomed to needing to “knock our heads through a brick wall” and many of us will need to summon that fighting spirit if we hope to get one of these PPP loans before the funding runs out.
Thank you for reading and we hope this blog post about PPP Loan Tips and Tools has helped you!