small business owner

Summary List Placement

Starting next week, the Small Business Administration (SBA) will open applications for the next round of Paycheck Protection Program loans. 

Certain lenders including community development financial institutions (searchable database here) and minority depository institutions (list here), will be able to offer loans to first-time PPP borrowers on Monday and Tuesday, then to second-time borrowers on Wednesday. All other participating lenders will be able to process loans in the days following. 

Insider held a webinar to answer business owners’ questions about getting loans. The live Q&A filled up quickly before we could get to everyone’s questions. Many people asked how to calculate payroll as a sole proprietorship, how loans will be forgiven, and how to document 25% revenue loss. 

We submitted these questions to lawyers, accountants, lenders, and educators to get the answers you need ahead of the next round of PPP applications. 

But first, we’ll go over the basics. 

Businesses that didn’t receive PPP loans in the first round are still eligible to apply this time if they have 500 or fewer employees, while the PPP “second draw” is geared toward smaller and harder-hit firms. 

Existing PPP borrowers can apply for a second loan if they have 300 or fewer employees and demonstrate at least a 25% loss in revenue in the first, second, or third quarter of 2020 relative to the same period in 2019. There are alternative calculations for seasonal businesses and businesses started after 2019. Businesses started later than February 15, 2020 or are publicly traded are not eligible.

Read more information on second-time borrowers here and eligible businesses here. 

You can find the SBA’s official guidelines for second-time borrowers here. 

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The deadline to apply is March 31, 2021, but funds will be allocated on a first-come-first-served basis.

Now, for your questions. 

Some questions and answers have been edited and condensed for clarity. We’ll continue to add responses as we receive them.

Table of Contents: StaticCalculating payroll
How do I calculate my payroll costs if I hire 1099 contractors but don’t have W2 employees?

“1099 employees do not count towards your payroll costs. They are eligible to apply for PPP loans independently. Salary that you pay yourself is eligible towards your payroll calculations.” — Brock Blake, founder and CEO of small business loan marketplace Lendio

Can I cover new employees? 

“Payroll for new employees hired in 2020 can be factored into the calculations for new PPP loans since the maximum loan amount is based on the allowable costs from the one-year prior to the loan. It is important to note that a first-time borrower has the option to use either 2019 or 2020 to calculate their maximum loan amount. This was done to ensure that first time borrowers are treated even-handedly.” — Robbin Caruso, CPA and partner at Prager Metis

Are payroll costs for second loans measured over the same period as the first batch of PPP?

“The legislation allows businesses to choose between two periods for second loans. This is the same as the CARES Act so it should apply to both first and second draw …read more

Source:: Business Insider


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