April 3, 2020

Paycheck Protection Program (PPP) loans

How it helps
The new PPP loans are designed specifically to provide small businesses, including independent contractors, gig workers and sole proprietors, with cash support. The loan amount you are eligible for is 2.5 times your average monthly “payroll” expenses—which can include your own “salary” and health insurance premiums. What can be treated as “salary” is dependent on how you operate your business (e.g., are you incorporated, are you a sole proprietor, are you an independent contractor reporting on Schedule C). For example, for unincorporated independent contractors, your salary may be most easily determined by looking at the net profit listed on Schedule C of your tax return. If you contract with and provide services to multiple contracting companies, this is aggregated in the analysis.

If you have already filed your 2019 taxes, or prepared a 2019 return, this number is reported on line 31 of the Schedule C. If you have not filed your 2019 taxes but have accurate bookkeeping completed for all of 2019, this will be the Net Profit line on your Income Statement. Your Openforce account can help supply documentation to support these numbers. Please contact your tax advisor or business consultant for assistance in this regard.

You may also want to check applicable time limits —i.e., have you been operating your business (or rendering independent contractor services) prior to February 15, 2020?

Importantly, almost the entire amount of the PPP loan may be forgiven (no payback requirement) when applied toward qualifying expenses. These qualified expenses include items such as “payroll” costs (see above) and other designated business expenses listed in the Act.

Because these loans will be available through a list of approved lenders, some terms may vary but the interest rate will be 1% on the portion of the loan that is not forgiven.

How to get it
The PPP loans will be available through approved banks and credit unions, so consult with yours directly to see if they are participating in the program. No personal guarantee or collateral is required.

Additional resources
Treasury Department’s borrower fact sheet
Chamber of Commerce’s complete guide to the PPP
Chamber of Commerce’s PPP checklist
Sample application (learn what information to provide to your bank or credit union)