There’s still $120 Billion Available for Small Businesses

Uncategorized May 13, 2020

How is there money? Easy, 45% of small business polled didn’t think they would qualify. Or were told by their bank they could not send in an application. Many big banks are not doing applications unless you have a business account at their bank. A few are accused of sending in bigger loans applications first. (A big no-no) 

 

But the government has responded in a not so subtle manner. Publicly traded companies and entities with cash (I’m looking at you Harvard with your 40 BILLION) have been required to return the funds they received. This is all to help small businesses survive these crazy times. 

 

If you haven’t applied and are considering it, there are a few financing companies working with small business so you still have time. If you haven’t considered it, you might. Self-employed businesses are eligible. Here’s a quick rundown of the PPP for self-employed:

 

How much can you get?

2019 net profit divided by 12, to get a monthly “average” net profit. Then multiply it by 2.5 to get your PPP amount

 

Example:

70,000 net 2019 profit (limited to 100K)

70,000/12 = $5,833

$5,833 x 2.5 = $14,582 Maximum Loan Amount

 

You might not have to pay the loan back

Yup! It can be forgiven. Since you’re self employed, you can automatically get it forgiven under the “owner compensation replacement” rule. To calculate the maximum owner compensation replacement, multiply your 2019 net profit by 0.1538 (8/52 for 8 weeks forgiven in a year of 52 weeks)

 

Example:

70,000 net 2019 profit

70,000 x 0.1538 = $10,769 Maximum Owner Compensation Replacement

If you got the full loan amount, the difference of $3,813 would be forgiven if spent on eligible expenses like utilities, rent and mortgage interest. (FYI home office expenses can qualify)

 

 

 

What happens if it isn’t forgiven?

If it isn’t forgiven, it remains a loan at 1% interest for 2 years (that’s a great loan option) Plus there isn’t a prepayment penalty if you pay it back early. The first payments are also deferred for 6 months after you get the funds.

 

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