Mortgage Loan

Paycheck Protection Program: How to Apply, Loan Calculation, and More





I was up until midnight last night poring over the Treasury Department’s Interim Final Rule for the PPP loans, and I’m going to share with you what I learned. Go to 3:35 to go directly to my PPP analysis.

➡️ Get Matched with a PPP Lender:

➡️ EIDL Disaster Loan Video:

The first thing you need to know about PPP loans is that they are not direct loans from the feds. They’re more like an SBA 7(a) loan.

SBA is guaranteeing 100% percent of these loans, but they will be made through SBA-approved lenders.

And your SBA lender will service your loan.

Also, PPP loans are in fact “first-come, first-served”.

PPP Basics:
– Terms of up to 2 years
– 1% interest rate. 0.5% was thrown around earlier this week, but Treasury came out with this and said 1%.
– No payments for six months.
– Forgivable in whole or in part

You can get both EIDL disaster loan and PPP paycheck protection program loans, but their proceeds can’t be used for the same purpose. You can refinance your EIDL loan into a PPP loan.

The CARES Act said that the the full principal amount of the loan and any accrued interest can be forgiven if you use all of the loan proceeds for forgivable purposes and employee and compensation levels are maintained.

Remember, payroll is the priority here — it’s called the Paycheck Protection Program. The whole point of these loans is to keep the lights on in your business and to keep people working.

In light of this, the SBA and the Treasury Department have said that no more than 25% of the loan forgiveness amount may be attributable to non-payroll costs.

The first day to apply for a PPP is today, April 3, and this program is running through June 30 or until funds are exhausted, that’s what they’re saying right now.

Now although today is the official “start date” for PPP, most SBA lender banks are not ready, especially the old school brick and mortar banks.

Here are the eligibility requirements for PPP Loans:

– You must be a small business, meaning 500 or fewer employees whose principal residence is in the U.S. There are exceptions for some businesses in certain industries with greater than 500 employees, but if you own such a business, I assume you have in-house legal and/or financial counsel to consult with about this.

– You had to be in operation on February 15, 2020, and you either had employees to whom you paid salaries and payroll taxes, or you paid independent contractors, reporting their income on Form 1099-MISC. If you yourself are a sole proprietor or independent contractor, meaning even if you’re a one-man or one-woman show and you file Schedule C, you’re eligible, as long as you were in operation on February 15.

– You cannot be incarcerated, on probation, or parole, or have been formally charged with a crime or been convicted of a felony within the last five years.
You or your business cannot have ever been delinquent or defaulted on an SBA loan or any other government-backed loan.

To calculate your maximum loan amount, take your payroll costs from the last twelve months for employees whose principal place of residence is the United States.

Subtract any compensation paid to an employee in excess of an annual salary of $100,000. If you’re a one-man or one-woman show who doesn’t have payroll but just has self-employment income, subtract any of your earnings that are in excess of $100,000 for the last twelve months.

Then you have that number, those total payroll costs less amounts greater than $100,000. Divide that number by 12.

Multiply that new number by 2.5.

Add the outstanding amount of any EIDL disaster loan that you received between January 31, 2020 — that’s when the “disaster” began — and April 3, 2020. This is EIDL received, not applied for. I doubt many of you have actually received an EIDL right now.

The definition of payroll costs for PPP purposes is broad, including:

– W-2 wages paid to employees whose principal place of residence is within the U.S., including wages paid to yourself
– Tips
– Severance
– Benefits, including health insurance coverage, insurance premiums, retirement contributions
– State and local taxes assessed on compensation of employees (but note that FICA taxes — Social Security and Medicare taxes you pay for your employee — do not count)

If you’re a one-man or one-woman show, your payroll costs are your net income from self-employment.

Payroll costs do not include payments to independent contractors on pay on 1099.

PPP loan proceeds can be used for:

– Payroll costs as defined previously, and at least 75% of the PPP loan proceeds must be used for payroll costs
– Costs related to the continuation of group health insurance
– Mortgage interest payments.
– Rent payments
– Utility payments
– Interest payments on pre-existing debt (pre-existing meaning incurred before February 15, 2020)
– Refinancing an EIDL loan into a PPP loan

source

46 comments

  1. ➡️ Get Matched with a PPP Lender: http://go.moneydoneright.com/PPP

    Reply
  2. my wife and I run a sole proprietorship with both of us filing jointly as self employed, can we count ourselves as 2 self employed income for PPP ? Thank you.

    Reply
  3. Without further guidance from Treasury and/or SBA, IF payroll taxes are excluded from the loan balance amount and cannot be forgiven … how is the employer expected to maintain the same level of employees and their pay and be able to pay the related payroll taxes if their business income has abruptly come to a halt? Are we assuming the employer will simply repay the loan proceeds that had to be used to meet payroll tax liabilities?

    Reply
  4. what an amazing video.. subscribed sir.

    Reply
  5. The 1099 worker part is a show stopper.
    I have 20 1099 and pay them ~$180k/mth. But I cant count them as payroll. So if my rev is down I need the ppp to pay the 1099 or I let them go. So no ppp for me means 20 more unemployed and another business closed. The kicker is, my 1099 workers can get a ppp loan to pay themselves and get it forgiven and collect fed unemployment, while I go broke….and there is no business for them to return to in 4 mths….so how is this helping small business owners who make good use of 1099 workers. Most of which are professional level personnel….this makes zero sense to me and I'm just a little old rocket scientist from the 90s.

    Reply
  6. I'm still trying to find out if you can apply for unemployment AND the PPP loan… Does anyone have any legitimate info on this?

    Reply
  7. Logan, what happens if your employees were hired less than 4 months ago, but the company was in business in 2019 (corp formed in 2018)? Is the average monthly payroll cost based on the salary of employees (maxed at 100k) / 12, or whatever you paid them over those 4 months / 12? Asked in another way, does the start date of employees mater? How does prorating work in this case for $100k+ employees? Thanks so much.

    Reply
  8. Hello I am a sole proprietor( I do not give myself paychecks) and I have payroll employees too. Do I add my personal net income from my taxes to the payroll and put that on the application so I can also get paid. I’m confused by the application because it just says payroll tax times 2/12. I would assume I would add my own income in there too but I’m not sure since my income is not on payroll. Thank you for the informative video.

    Reply
  9. Helpful info, thank you! How would I calculate the max ppp if I opened my business late Oct of 2019?

    Reply
  10. Did anyone receive an email confirmation after applying for EIDL? I didn't and am concerned.

    Reply
  11. How can we hire you?

    Reply
  12. I asked my bank about this and they told me to talk to a CPA. The treasury said go to your bank. I'm now confused!

    Reply
  13. This is so helpful, thank you for sharing your knowledge, I’m going to use your link to match an SBA lender, God bless.

    Side note, anyone get the EIDL 10,000 funds yet??

    Reply
  14. I’m a Rideshare driver. You mentioned Sole Proprietors file next week. Can the link you gave help me with that now, or do I still have to wait?

    Reply
  15. i really like your video. You have explained the program very clearly! I have attended a few meetings explaining this from different local CPAs, who confused me more each time. Glad I found your video. Look forward to more of your videos.

    Reply
  16. Great Video and information! My question is we are a seasonal business (Tax Franchise) open January through April, our season has been extended this year through July however I am not certain how to calculate payroll. If you are a seasonal employer, payroll costs for the 12-week period starting February 15, 2019
    or the period from March 1, 2019 to June 30, 2019 is what I am seeing but nowhere does it say how many months to divide this number by… Example if the number is $25,000 do I divide it by 3 months? 4 months that we ran payroll? Surely not 12? Please help. Thank you.

    Reply
  17. This was so so helpful!! Thank you so much for this amazing information!

    Reply
  18. I am S Corp since 2015 I hired 3 of my independent contractors 12/1/19 how/can I factor their payroll costs since it’s only been 4 months that they have been hired full time and on payroll. Thanks

    Reply
  19. At 10:10 he says you can get the loan on your own profits. Does this mean regular profits that are not W2 payments made via S-Corp election? I see how W2 payments to yourself are eligible, but are regular profits that you pay the 15.4 self-employment taxes on also eligible?

    Reply
  20. Would owing taxes or having a tax lien disqualify a business?

    Reply
  21. Great info! I have an LLC in which I am the only employee and pay myself a small salary, my business makes more money than my salary. Can I use my total business revenue or just the salary I pay myself?

    Reply
  22. Thank you for this video. I have an S-corp established 7/2019 where I pay myself and send 1099. Should I apply for SBA loan as Scorp or Sole proprietor since I was SP first half of the year with 1099? Thank you.

    Reply
  23. Excellent info, thank you so much. My husband and I have an S-corp. We pay him a wage through W2 and take the rest through distributions that flow to K1. Can I use the distributions in calculating the payroll amount?

    Reply
  24. I am a photographer, I have a C-corp and all my clients pay my business directly. I typically only pay myself a small portion to my personal account and try to leave the majority of my earnings in my business for expenses etc. I am struggling to figure out what number I am allowed to use for any loan or UI application. Lets say my business made $100,000 in a year but I only directly paid myself $20,000. Am I only allowed to use the $20k for my "income" when working out the calculations? Or can I use the full amount my business made since I am the owner and only employee? Any light you might be able to shed would be extremely helpful. Thank you for making this video and attempting to help everyone in such a confusing time!!

    Reply
  25. What about statutory employees? I run my own financial planning firm but my broker/dealer is Prudential.

    Reply
  26. I'm small Real Estate brokerage operating under a s-corp. All of my agents are independent contractors. I pay myself a small wage but also earn my own commissions. Under the payroll section do I include my commissions with my w-2 paid wage? Should my independent contractor agents file their own PPP and EIDL?

    Reply
  27. Thank you for the great video. I own a small business and pay my health insurance on myself through my business. I understood that the health insurance premium could be added to my application because it was paid by my business. My cpa says since it is not on my w2 it is not allowed? Could you help clear up this question it would be appreciated? Thank you so much.

    Reply
  28. Hello. Can you please help me figure out max PPP loan amount?
    S corp. 1 employee, w2. Annual salary 300k. Health insurance benefits 19k/yr. Retirement benefits 56k/yr. State taxes withheld 18k/year. Thanks so much!

    Reply
  29. I am an LLC and have 12 part time employees that were laid off once our facility was forced to shut down. I have a manager that is full time and I can put her to work at home, but I believe she has already filed for unemployment. Can I apply for this and her not continue the process with unemployment for following weeks? Also, on this application, do I say I have 13 enpoloyees or 1 since she is the only one who I would need to pay during this time? Thanks so much! Great video, very informative! Forwarding to others now 🙂

    Reply
  30. i have credit card debt because amazon has not opened up to 3rd party sellers. suggestions?

    Reply
  31. Great information Logan! My business is struggling right now and I had to layoff all my employees because we are not allowed to work in our state. If I apply for the PPP, will I have to hire my employees back just to sit there? I think the timer starts when the loan is issued. I will need this loan once we are allowed to return to work. How can I get around this?
    Thanks.

    Reply
  32. I have a small hair salon which is LLC. I am not in payroll but I work in it and I have a employee that is in payroll. How should I do?

    Reply
  33. THANK YOU; great use of 14 minutes!

    Reply
  34. JJ the CPA said that if you apply for both the EIDL & the PPP that only $5,000 is forgivable of the PPP. Is this true? Your video was the best I've seen on this topic so far, thank you.

    Reply
  35. I am a sole proprietor I get pay every month with the amount left after payroll and expenses are meet with 2 w2 employees the are currently in unemployment since this April 1st, my question is a can apply for this loan, to pay my self and my two w2 employees, and can i calculate the total payroll cost using my schedule c form 1040 plus the total payroll expenses .
    and the amount pay to me will be this also be forgivable? thank you in advance for your answer

    Reply
  36. I applied for EIDL but didn't get anything yet. guessing I wont need to add anything for that? and just need the actual average monthly payroll as you explained?

    Reply
  37. Excellent video! Thanks! Im a single member LLC consultant with 2019 Schedule C net income. If I apply for PPP, what sort of documentation does the bank administrator use to approve forgiveness in 8 weeks? The PPP loan would go to my business account then to my personal account. No documentation other than an account to account transfer. Any insight?

    Reply
  38. Logan, because of the problems with the roll out of PPP, do you recommend that small businesses apply for the EIDL now and then also apply for the PPP when we can? I have contacted 2 banks that we do business with and one had a link to be put on an email list to get notifications. Wells Fargo just says to keep checking their website. We're getting nervous we will miss out and end up with no money to help keep our business alive and help our employees.

    Reply
  39. Can I apply for multiple businesses I own? Or just one?

    Reply
  40. Can you include SUTA into the maximum loan calculation? I know federal taxes are excluded..

    Reply
  41. I am trying to get approved through that NAV link (I bank with chase and they aren't ready) but don't understand how after I signed up with NAV (a very intimate application I must say)… Where do I navigate after I am in NAV Home?

    Reply
  42. What type of documents do they need? (quick books? excel breakdown? Actual tax documents??)

    Reply
  43. I'm a an Uber driver can I apply for the PPP loan?

    Reply
  44. Do all the employees have to work over 30 hours and be considered Full Time? The Treasury PPP Application says "The Applicant will provide to the Lender documentation verifying the number of full-time equivalent employees on the Applicant’s
    payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight-week period following this loan."

    Reply
  45. Logan, great info, clear and concise, thank you!

    Reply
  46. Is workers compensation included in the payroll costs?

    Reply

Leave a Reply