The deadline is fast approaching from the SBA for micro business owners to apply for Payroll Protection Loans (PPP). This program is available for small businesses as well as independent contractors, solopreneurs and gig economy workers.
Welcome back to the AIDtoNAV Podcast. I’m your host Robert Earl, and we’re providing clear direction for micro and small businesses to navigate through the marketplace.
Today going to spend some time… At the time of this recording, it is June 24th. There’s a deadline for, as of this point government assistance under the PPP program, the Payroll Protection Program. So, I want to spend a little bit at a time here on the podcast urging you if you haven’t already to take advantage of the program. Short little window for you to get your application in and talk to you about some of the programs that are available. Then we’re going to in the second half of the show, talk about forgiveness. The guidelines changed for the forgiveness on the 16th of June and so we want to make sure that we’re covering those bases as well.
So, I’m going to go ahead and switch on over here to the PPP website on sba.gov. If you are listening to this on a podcast I’m going to include links on our website aidtonav.com so that you’ll be able to follow along. But I’ve just gone to sba.gov and as we go through this, we’ll go full screen here on sba.gov. The best place that I’ve been able to find is going underneath the funding programs, under loans, and then go to the Coronavirus relief options. When that pulls up, there’s going to be a little bit of a splash screen, but here’s the information that we’re really going to take a little bit of time and focus in on your options that are available through this.
So, there is the Payroll Protection Program. This Payroll Protection Program is for small businesses. We can argue about the definition of small businesses, but it’s available for small businesses, solopreneurs, those that are involved in the gig economy, those that are independent contractors. So, this covers your real estate agents. This covers your insurance agents. Even though you’re brokered with another company or that you are paid out as an independent contractor under another company you can qualify for this program and what this program is going to do.
So, let’s break this down very, very simply. If last year in your gig economy that you made, and I’m going to make the math very, very simple here, that you made a total of $12,000 from this gig. Well, what they’re going to do is they’re going to take the information and you’re going to have to verify, validate your $12,000 that you made. Usually, this is going to be done through your tax return. I’m not a tax accountant, but your information say on a Schedule C, is the information that you’re going to be able to provide. This isn’t the total amount that you made. So, although the amount that you took home, you might’ve had a gross 1099, it might have been $100,000. You might’ve had expenses that you claimed that left you with, and I’m making this simple for the math, $12,000.
They’re going to take that amount, divide it by 12. So, they’re going to figure that you made $1,000 a month and with this $1,000 a month, the PPP will give you a loan up to two and a half times what your amount is. So, as a solopreneur, as a gig economy with no employees, you still are eligible because that 12,000 that came in after expenses was your payroll. This is the amount that you had as a payroll coming in, that you then would have paid taxes with the remainder of your 1040 or with your self-employment taxes that you paid. So, this two and a half times would also apply if you had two employees. It would be the amount that you paid out in payroll time’s two and a half and that’s the amount that the PPP would provide for you.
Now, this payroll protection, if we go ahead and click on the payroll protection, I’ve done that here on another screen. If we go ahead and say, okay, that’s great, let’s apply the first thing that’s going to direct you to is a lender and it’s going to ask you to look for a lender in your particular area. Now, your mileage may vary with different lenders. I’ve heard of some others that have had great success with, believe it or not PayPal because PayPal has streamlined the process. They work with WebBank, and you can get approval very, very quickly. As a small business, you also may go to your local bank. Some of the local banks are very much participating and have the process in place to be able to participate in the PPP program because they want to generate the fees that are associated with it to be able to get this payroll program.
So, at this particular time, not going to spend a lot of time talking to you about your networking and your relationships. This will be in future shows where we’re going to talk about planting those seeds into your networking with your banker, with your accountants, so that when you’re called upon, when you need these types of services, like getting your financial statements or getting your taxes in place or being able to work with a local banker that understands you as a small micro business, not a large business with a small business that you’re able to call upon these resources in being able to help you. But being able to work with the Payroll Protection Program, getting your application in. I know that there’s been different starts and stops to it of saying that there’s funding available, not available. There’s still funding available, it’s still goes through to the 30th of June.
So, going back to the other programs that are available before we get to the forgiveness of the PPP, want to talk about some of the other programs that are available to you and one of them is the EIDL Loan Advance Program. So, the EIDL program for Economic Injury Disaster Loan. If you’re in the United States, you fall under the umbrella of us having a disaster. I’m here in Florida. We have certain times where the governor has to declare an area a disaster area when we have a tropical storm or hurricane coming in. For the rest of you in the country, this has already been determined that we are underneath this area. So, what this program does provide is a loan advance of up to $10,000. There have been some modifications in the way that the SBA is applying the rule. It may not be the way that Congress originally intended, but we’re not going to get political here.
The way in which they did this is it’s $1,000 per employee. So, back to again being the solopreneur, this is a program that you’ll want to look into. This is something where you are going to want to make the application to be able to go through here. Again, on June 15th, they began accepting new applications, again from qualified… I’m highlighting here on my screen small businesses and agricultural businesses. So, you have an opportunity to get this application in and be able to not only get whether it be a loan but the loan advance. The loan advance itself does not have to be repaid. If you do take out a loan, a disaster loan, and you have a need for that, say you have employees or business, then obviously those are things that you would have to pay back. But the advance, the initial part, the $1,000 per employee, that does not have to be repaid if you’ve applied and if it’s funded.
So again, this is a program that’s open and available and you want to make sure that you take advantage of it and not take advantage. Maybe that’s not the right term. This is the avenue that the government has chosen to put funds into the economy. They aren’t encouraging other different ways. I’ve heard of other countries that have encouraged by giving breaks on terrorism potentially, or on hotels stays because they’re going to want to get people moving again, or they’ve done it in other indirect ways. Our government also did it to the individuals with stimulus checks, the first round of stimulus checks. Those were designed to put money into the marketplace.
This is available as well for small and micro-sized businesses. So, it’s not really taking advantage of the program. It’s knowing what the rules are, what programs are available. If you don’t have a conscientious objection to utilizing the government funds in that way, you’re doing this to not only provide payroll for your employees that you have but also for yourself. These are dollars that in most cases, you’re going to reinvest, you’re going to be spending back into the economy and that is what the government wants to have happen. Part of the reason that they haven’t passed a second round of stimulus is that the PPP is still available. So, take advantage of the program. I’m using that word again, to be able to go through this.
Now, the rules just recently changed for forgiveness, and I’m going through, we’re talking about specifically the Paycheck Protection Program. You’ve got this money and there are certain requirements that are paycheck protection. You can’t just use this money any way that you want to. You can’t go buy equipment. It has to be done and I’ve gone to bench.co. Bench.co, a resource that’s available for you to be able to have a little bit of bench strength of consulting with an accountant. They’ve put together a great blog post that they updated just recently about the Payroll Protection Program. So, the program itself was covering payroll, which included salary, wages, vacation, anti-parental family medical leave, sick leave, any mortgage interests that you have, any rent, and utilities.
So, I like to think of it as keeping the people employed and keeping the roof over their heads. That is what it was covering. They have extended the period. It originally was eight weeks. They’ve extended the period for eligibility to 24 weeks of coverage. I’m going to zoom in here a little bit more. 24 weeks of coverage for this to be able to go through. They also made an adjustment that goes through with a 60:40 rule, that 60% of your loan must be used on payroll costs. Payments to independent contractors cannot be included. Now, these parts are a little confusing. If you are an employer and you’re paying out to employees that must be used for your employees. If you are a solopreneur, are an independent contractor with someone else, you can pay out yourself and that would be “payroll” even though you don’t use an ADP type of payroll system, you have to do this yourself. There are some staffing requirements of the program itself and then talking about rehiring the employees. I’ll include a link on our website aidtonav.com to this article so you’ll be able to look at it and go through it.
Now, forgiveness. The forgiveness for self-employed, because you’re claiming two and a half months’ worth of your 2019 net profit that you’re replacing with pay. This means that you can record this information, your mortgage interest, your rents, your utility expenses. You must have claimed or entitled those on your Schedule C before to get this particular forgiveness, but the form has gone out. Bench also has a guide to filling out your PPP forgiveness. I’ve gone ahead and downloaded the form as well, but you’ll be able to get the new updated information. It’s going to ask you about your loan number. If you had any EIDL advances that went onto it. So, it’s kind of a catch-all that goes in here. What was your payroll schedule? And then you’re going to have the facts and figures that you’re giving them to submit in for your forgiveness. So, this is something that you’ll want to take a look at.
So, let’s recap. A couple of programs, the deadlines are coming down that you have available to you. The Paycheck Protection Program unless there’s a last-minute act by Congress to extend this. It looks like that program is coming to an end at the end of June the EIDL Loan Advance to being able to submit in for that and then other programs that you have your business going through the hoops of the SBA express loan, bridge loan, and the debt relief. But we’re focused here on the Paycheck Protection Program documenting what you did with your expenditures, your payroll that you had so that you can fill out the forgiveness and be forgiven for this.
So, this is one of the topics to know. We’re early on here in the podcast and the videos. These are the types of topics that we’re going to take a look at. We’re going to take a look at what’s currently going on in the micro and small business arena. What programs are available to you, what guidance you can have. We’re not just going to talk about strategic and 75-page business plans. We’re going to try to take the strategic and break it down to the tactical. Give you some practical applications that you can put in place. We’re going to have some interviews with resources that you can seek out whether they be on the national level, or I’m going to give you examples of local resources that I as a micro-business owner turned to so that you can find these similar types of resources in your area. So, we’re going to have those interviews getting started up.
I would invite you to subscribe. We’re on the major players that are available. So, you can listen to us on Apple, on Google, on Spotify. We’re available there. Also, if you like what you’re seeing here on YouTube and the video, give a thumbs up. Please subscribe and we look forward to providing you clear direction here for micro and small businesses. So, I’m Robert Earl until next time, make it a great day!