Breaking Down the SBA’s Payroll Protection Program (PPP) Loan for Small Businesses

April 8, 2020

The announcement of the PPP loan offering in conjunction with the CARES Act was welcome news of potential financial relief for many small businesses. For the self-employed or independent contractors (who, for the purposes of the PPP, have been coined “solopreneurs”) it was a beacon of hope that they too might get a badly need break in the financial assaults their businesses have endured. However, word on the street is that for many, there were still a lot of questions and conflicting reports on the program, frustrating these applicants.

In a prior post, we walked through some basics of the loan’s purpose and the eligibility criteria. The SBA also released an Interim Final Rule regarding the PPP, which covers loan eligibility and use and answers some of the questions a potential applicant may have. Highlights from this guidance, as well as a few other tips, are set forth below.

While you should always consult with your lender, your accountant and your attorney, we hope the following may help in clarifying the PPP loan, and its application process.

  • Applications for PPP must be completed by June 30, 2020. However, the PPP is first-come, first-served. After the funds from the CARES Act are depleted, presently, applicants would be out of luck.
  • Solopreneurs can apply beginning Friday, April 10. Contact your bank.
  • Applicants will need to apply through an SBA lender, not the SBA directly (that is for the EIDL).
    • Most experts on this are recommending you apply through YOUR bank. Some banks are requiring you be an existing bank customer to apply.
    • You’ll also need to provide proof of your “payroll costs” for the loan.
    • While your bank will give you information on what they require for proof, typically filings such as IRS Forms 941/943 (for employers) and income reports such as a Schedule C or 1099 (for the solopreneur) will suffice.
  • You can apply for both an EIDL and a PPP loan.
    • In some situations, you can refinance some or all of an accepted EIDL loan into a PPP Loan.
    • In some very particular situations, you may be able to accept both an EIDL and PPP loan; however, this should be very carefully reviewed before accepting both.
  • Presently it does not appear an applicant needs to prove any actual financial loss; it is presumed this will occur.
  • PPP loans may be forgivable up to 100% depending upon how the loan proceeds are used within the allowable uses.
  • A few notes on “payroll costs”:
    • If you are solopreneur – no other workers – your wage, commissions, income or net-earnings are what constitute your “payroll costs.”
    • If your business utilized Independent Contractors (ICs), the payments for those ICs do not count towards “payroll costs” for calculating loan amounts nor are they eligible for loan forgiveness.
    • If you laid off any workers due to COVID-19 and rehire them before June 30, 2020, you may still qualify for loan forgiveness.

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1. The information above does not constitute legal advice, nor does it create an attorney-client relationship. Please consult your attorney with specific questions.
2. As this situation is constantly changing, we will make every effort to stay current on this topic, however this information is provided as general guidance and may not apply to your situation, nor should it be relied upon exclusively. Please consult and confirm with your attorney if you have questions about these updates or their applicability.  
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Copyright © *2022* *Law Offices of Lindsey King*, All rights reserved.*

Copyright © *2022* *Law Offices of Lindsey King*, All rights reserved.*

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