Ready, set, go. The SBA and banks have started accepting applications for the Paycheck Protection Program loan (PPP) from Self-Employed individuals, including those with sole proprietorships and/or with no employees. Although the Congressional appropriation for the PPP program has currently run out, Congress is expected in the near future to appropriate additional funds for the program. Applications that are already submitted are expected to have priority over those that apply later on after the new appropriation is made.
Applicants who are sole-proprietors or single member LLC’s must meet the following requirements to qualify for the PPP program:
- you were in operation on February 15, 2020;
- you are an individual with self-employment income (such as an independent contractor, sole proprietor, or single-member LLC);
- your principal place of residence is in the United States; and
- you have filed or will file a Form 1040 Schedule C for 2019
The amount you can borrow under the PPP loan can be calculated using your 2019 IRS Form 1040, Schedule C. You should reference Line 31 (net profit). Divide your net profit number by 12 to find your average monthly net profit. Then multiply the average monthly net profit by 2.5. The end result is the PPP loan amount. As part of the PPP loan process, you may need to provide the bank with additional documentation, which might include 2019 IRS Form 1099-MISC, invoice, bank statement, or book of record. You will also need to establish that you were in operation on or around February 15, 2020, with a 2020 invoice, bank statement, or book of record.
In terms of how much of the PPP loan (if you qualify) is eligible for forgiveness, this amount will usually be (a) 8 weeks of your 2019 net profit, (b) mortgage interest paid during the covered period on real or personal business property (must be deducted on Schedule C); (c) rent payments on lease agreements in place prior to February 15, 2020 (business leases only); and (d) utility payments (business utilities). Any forgiveness will be reduced by any COVID-19 qualified sick or family leave tax credit you claimed.
Virtus Law, PLLC continues to monitor developments in this (and other COVID-19 areas) and will continue to post relevant updates to this website.