When the first PPP round went down, maybe you didn’t know you were eligible to receive the funding until the funds had run out. Or (you thought) you had to wait until the April 10th date before you could apply. Maybe you didn’t have an account with an SBA lender – or the kind of account that they required.
Or… like me, your application at one of the big banks got stuck with an error… and you never heard back from them until long after the money was gone. Fortunately, I had gone on to plan B and did a deep dive into 27 banks from the SBA lender list and completed an application with an awesome lender. My app is now lined up to be processed as soon as the funding is restored.
Its Time for Round Two!
The second waive of PPP funding (Payroll Protection Act) was approved by the House on April 23rd, 2020 with additional stipulations on allocating the monies. On April 27th, the SBA began processing the applications that were in but not funded by the first round and accepting new applications that some banks are accepting.
Take a quick look at my article on the PPP Loan program if you need more general information on it. Here, we’ll be getting into specifics on filling out the application. I don’t address the nuances of partnerships or new or seasonal business here but most information is applicable, you’ll just need to look to read the PPP guidelines or FAQs specific to your situation or check in with your business advisors.
Let’s get started.
At its essence, the PPP application is just 2 pages long, so its totally achievable to get it done quickly if you’ve got the numbers and information ready.
- Intent and Declarations
Business owners will self-declare their eligibility so its crucial to read and understand the PPP guidelines since you’ll be stating that (among other things) you are financially impacted by the pandemic and meet all of the eligibility requirements.
Don’t have time to read through mountains of information and clarifications? You’ll be okay if you’re circumstances are pretty standard. The requirements and what you’re agreeing to will be included within the application and the final loan documents. If something’s unusual in your situation, you may need dig into those documents or consult with a CPA or other business advisor.
- Get organized
Make two electronic folders where you’ll keep downloads of information you’re gathering including blank templates. After anything is filled out, put them in a separate folder or label them differently to ensure you grab the right ones when you go to upload or email them.
For documents you physically need to sign and ‘scan’, if you don’t already have a process for it, you can use your phone and take regular photos of the items or use an app like Camscanner (which I use) or Office Lens that straighten and adjust pictures of documents and lets you store them for online retrieval.
- Business Type
The form says to check one box, but if you’re like me, several actually apply to you (4 in my case). My suggestion is to select the one that makes processing it easiest.
• If most or all of your income is from 1099’s – select Independent Contractor.
• If most or all of your income is from Sales of products or services without 1099’s, select Eligible Self-Employed Individual
• If you’re its Partnership income or you’re a C-Corp, I’d choose those.
- Business Legal Name, DBA, TIN
You’ll use the Business Name listed on your state filing documents if you have one file with the Secretary of State. Arizona‘s are here if you’re also located here.
If you’re applying to a new bank, you’ll likely need to open an account with them to receive the funds initially. Given that, they’ll need documents to open your business account which may not be applicable if you’re applying with your current bank. If that’s the case, make a note of the first day you were in business and download a copy of your Articles of Organization if you’ve got an LLC (or similar for other entities).
If you use an EIN for your business, you’ll fill that in as the TIN, if not, use your Social Security Number. If your bank needs a W-9 from you as mine did, you can get a blank form form the IRS.
- Calculate Average Monthly Payroll
There are 3 path’s I’ll note here. Read the PPP guidelines on how to address additional variable or if you need to know what to include in within the Average Monthly Payroll number if you have employees.
It’s important to note that for each employee (including a self-employed individual), that the Payroll amount is capped at $100,000 per year.
Step 1 –
1 – If all your income is from 1099’s, add them up. If the number is over $100k, use $100k as your annual payroll amount.
2 – If your income is from other means, you’ll use your net earnings figure from 2019 Schedule C Line 31, which will also be capped at $100k if you’re an individual earner.
3 – If you have employees, you’ll take your payroll reports and cap each individual at $100k, then add in allowable business payroll expenses to determine your annual payroll amount. *
Step 2 – Divide the Step 1 result by 12 to get to the Monthly Payroll Rate
Step 3 – Multiply the Step 2 result by 2.5, the factor allowed by the program to cover intended expenses for an 8 week period.
Prepare a simple spreadsheet such as this one (here’s an image of it blank if you want to insert it into a document or print it directly out) to send in as your documentation for the calculation if its requested (or even if it’s not).
* If you have employees, the process does have additional considerations such as maintaining your staffing levels or re-hiring employees by a certain date. Don’t let it deter you though! If you need and are entitled to the funding and can meet the requirements for using the funds, apply before it’s too late.
- NAICS Code
An accurate 6-digit NAICS code (North American Industry Classification System) code was needed by my bank. If you don’t already know what you’ve used in the past, find one that is applicable on the NAICS website.
- Documentation – Business
To support your application – you’ll provide copies of your 1099’s, Schedule C (2019’s, or 2018 if you don’t have it completed yet), you calculation of the loan amount with the Monthly Payroll Rate and Loan Amount Requested clearly labeled and highlighted.
If you have employees, you’ll want to provide support for all additional expenses added such as health insurance, state and local taxes you pay on their compensation, etc.
- Documentation – Ownership
As the owner of the business, particularly if you’re applying at a new bank, you’ll also provide a copy of your license (front & back in color on one page), a possibly a second ID if asked (mine wanted a credit card with the middle numbers masked), your Articles of Organization if your an LLC, and likely a W-9 form for business.
I added that type of information on the bottom of my form to make it as clear and easy as possible for the processor.
- Business Bank Account
If you don’t currently have a business bank account with the lender your applying with, you’ll be asked to open one to deposit the PPP proceeds into. It’ll need to have the same legal business name that you used on your loan application.
Your first priority is getting the PPP application in so don’t worry about initiating asking to do this until the bank reaches out to you to open it. You aren’t required to keep that account active after the funding is disbursed but give them a fair shake at your business if you have the opportunity to since they’ve welcomed you in to their community.
- Apply. Be Responsive.
Do an efficient re-check that you’ve got the pieces ready (application, calculation, and supporting documents). Fill out the online form if there is one, or make the call if there isn’t.
Check your emails, text, and voicemail often. Respond to any requests or questions from the bank as quickly as possible. You want to keep your place in the processing line to give yourself the best chance of receiving the PPP funding. Lenders are as eager as we are to get your application processed so help them out by being the customer you’d like to have.
- BONUS: Loan Forgiveness
As I’m sure you’re aware, the PPP is structured as a loan. It’s a 2-year, 1%, no-closing cost, no-fee loan. Great terms by anyone’s measure. But even better…
It’s a loan that can be 100% forgiven. To qualify for forgiveness, you’ll submit documentation to the lender that shows the funds were used for it’s intended purpose (at least 75% to payroll and the remainder to specified business expenses) after the 8-week funding period that the loan covers.
Forgiveness criteria is included within the PPP guidelines but its’ not entirely clear yet how it will work for self-employed individuals with no employees. Those that don’t have the traditional office rental or business mortgage expense don’t have the same eligible business expenses available to them as traditional business. We have plenty of other business expenses though.
Hopefully in the coming weeks, additional consideration will be made for the single-member LLCs of the world, the sole proprietors, and others that also fall into this gap. We were thrown – and are appreciative of – this lifeline and I’d love to see additional guidance that puts us in our place as equally valuable members of the business community. My eyes will be wide-open watching for them.
Need a lender to process your PPP application?
The National Bank of Arizona is accepting new customers from any state. They provided me with excellent service when processing my own PPP loan and I’m happy to recommend them.
*If links or information I’ve provided have been helpful to you and you choose to use NB|AZ, please feel free to list me as your Agent on the application. There is no cost to you but I would receive a small commission from the National Bank of Arizona if your PPP loan is funded. Thank you!