Be ready for the second round of small business money.
UPDATED
The $350 billion Paycheck Protection Program (PPP) is out of money… but millions of small businesses didn’t see a dime. Congress continues to fight over details, but it seems like they’re going to authorize another round of funding for small businesses and self-employed people.
It’s impossible to predict the when and how, or whether the new program will have the same name and requirements.
But I am 100% confident in predicting that:
This money is going to fly out the door just as fast as the first round did.
So you have to be ready to apply the very first moment that you can.
That means having all of your paperwork ready to go and your books completely up to date. You can find a small business document checklist here and a self-employed/freelancer document checklist here.
It also means having some kind of business relationship with a bank. If you don’t already have a separate bank account for your business, open one right now. Some banks will let you use your Social Security number, but others will want an EIN (employer identification number). You can apply for an EIN right on the IRS website: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
Here’s how the PPP loans basically work: They’re based on last year’s average monthly payroll (or net income for self-employed people). The loan amount equals 2.5 times that average monthly payroll, enough to cover 10 weeks of pay. For example, if you’re self-employed and had net income of $72,000, your loan amount would be $15,000 (72000/12 = 6000 * 2.5 = 15000).
As long as at least 75% of that money is used to keep and pay employees including yourself (but NOT contractors), and the other 25% (or less) goes toward rent, mortgage interest, or utilities, it does not have to be paid back.
That doesn’t mean you can’t use the money in different proportions – you can, you’ll just have to pay it back. The unforgiven part of a PPP loan has to be paid back over two years with a 1% interest rate.
You can find complete details and PPP loan calculators here: https://www.sba.com/funding-a-business/government-small-business-loans/ppp/loan-calculator/
If you need any help putting your numbers together, contact me as soon as you can.
Stay well,
Michele