As we write this, current law says the Payroll Protection Program (PPP) cash infusion is going to expire on August 8, 2020.
If you have not yet applied for your PPP cash infusion, you likely need to get your completed application to an approved SBA lender on or before August 6, 2020. Why? Because the SBA needs to approve your loan on or before August 8, 2020.
Approval takes time. For example, when June 30, 2020, was the deadline, lenders stopped taking applications on or before June 28 so they would have time to submit applications and obtain approval on or before June 30.
Many small business owners have not applied for the PPP cash infusion because there’s a four-letter word associated with it.
That word? Loan!
Yep. That four-letter word (loan) has caused many business owners to say I don’t want to play the PPP game.
That’s wrongheaded. The PPP deal is not really a loan. It’s a cash infusion to help you through COVID-19.
Works Like This
For the self-employed and owner-employees of S and C corporations who have SBA-defined earnings of $100,000 or more, here’s the deal:
- I’m going to give you $20,833 today.
- I’m going to call it a loan.
- Sometime after the first 10.8 weeks or so, you will send me some paperwork.
- When I receive the paperwork, I’ll forgive your loan.
- You walk away with the $20,833, no strings attached.
What if your defined earnings are less than $100,000? Then you will receive less. For example, let’s say you are a Form 1040 Schedule C taxpayer with net profits of
- $75,000: you pocket $15,625, tax-free.
- $50,000: you pocket $10,417, tax-free.
- $25,000: you pocket $5,208, tax-free.
The results above come from the COVID-19 PPP. When you are a self-employed taxpayer with no employees, the PPP treats you as the one and only employee and treats your 2019 net profits as your payroll.
Jack operates as a Form 1040 Schedule C business. His 2019 net profit was $100,000. He qualifies for and receives a $20,833 PPP loan on June 29, 2020.
Sometime during the next 24 weeks, Jack spends the $20,833 on himself and applies for $20,833 (100 percent) of loan forgiveness based on his 2019 Schedule C (yep, last year), which he will receive. It’s automatic. Jack keeps the $20,833.
No tricks, no catches. Just free money in Jack’s pocket.
If you want to be like Jack, you have to apply for your PPP loan today. Don’t wait.
Why? The last day for SBA PPP loan approval is August 8, 2020. Note the word “approval.” Not submission. It takes a few days for approval. Apply immediately.
Bank not helpful? If your existing bank has not been or will not be helpful, try one of the PPP loan referral sources such as:
We have no relationship with the services above, other than our personal experiences and the experiences of our subscribers and members who told us their stories. Here are three of their true stories:
Story 1. John, a writer, went to Wells Fargo, where the bank told him they would not talk to him about the PPP because he had only personal checking and savings accounts at the bank. Next stop, Kabbage. Success. Kabbage did the legwork and found the bank, and John had his PPP money in days.
Story 2. Linda, a real estate sales professional, had business accounts at Bank of America but could not gain PPP traction with the bank. She went to Lendio, which connected her with a PPP bank, and within 10 days she had her PPP money.
Story 3. Allison operates a three-employee C corporation. She banks with a large bank, but her bank was not helpful. She went to the Nav website, and within minutes she was completing an application with a Nav-referred bank. Allison is smiling. She has her PPP money.
Planning note. Time is short. Apply to more than one lender, and use the first-come, first-served strategy.
Gary L. Watts, CFP®, EA