Small Business Owners: PPP Eligibility

In 2020 small businesses around the world were stunned by the economic impact of COVID-19. The paycheck protection program (PPP) was created to offer financial relief to small businesses owners, specifically to cover monthly payroll costs, rent, interest and utilities.

During the initial release of the loan “Main Street” struggled gaining access. With the most recent round of PPP, things are different. Companies with less than 500 employees are the focus. This time we’re turning the page to ensure that main street will survive.

PPP is a loan program which requires paperwork and thus seems complicated. Fortunately there are resources available to support small business owners through this process. Cook County COVID 19 Recovery Small Business Assistance is here. Across the county small business owners are encouraged to partner with Business Support Groups to learn more, access capital and thrive.

Most recently a PPP education seminar was held to share knowledge. Here are some of the main takeaways from that event.

Eligibility criteria for First Round of PPP (have not received the loan):
– In operation on February 15, 2020
– Have no more than 500 employees combined with affiliates (unless NAICS 72, 511110 or 5151 then 500 per location)

Eligibility criteria for Second Round of PPP:
– In operation on February 15, 2020
– Have no more than 500 employees combined with affiliates (unless NAICS 72, 511110 or 5151 then 500 per location)
– Funds from first round of PPP have been used completely
– Demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020, Gross receipts for 2019 may be submitted
– Have no more than 300 employees combined with affiliates, (unless NAICS 72, 511110 or 5151 then 500 per location)

Calculating the Loan Amount:

First draw applicants are eligible for 2.5 times the average monthly payroll, up to $10 million.
Second draw applicants are eligible for 2.5 times payroll up to $2 Million.
For businesses in the Accommodations & Services industries (NAICS codes 72) eligibility is 3.5 times the average monthly payroll, up to $2 million.

Loan forgiveness is an added benefit of the PPP loan but proved to be confusing for many small businesses owners in the first round. Fortunately, the criteria is clearer this round. Loan forgiveness varied based on use of the funds.

Eligible business expenses include:
– All payroll costs
– Rent & lease agreements
– Mortgage interest
– Utility payments

Criteria for Loan Forgiveness include:
– Employee and compensation levels are maintained
– A minimum of 60% must have been used on payroll costs*
– Funds must have been used in the 8 – 24 weeks from receiving the loan.

If the loan is not forgiven, the payment terms are 1% over 5 years.

*Payroll costs include expenses that are essential to payroll processes including operational expenses, protective equipment, property damage expenses, supplier expenditures.

Click here for a list of documents you’ll need to apply for the PPP. For one on one assistance in applying for the PPP sign-up here.

What You Need to Apply for PPP, Forms & Documents

Small businesses are often passion projects that started to turn a profit. There are endless tales of small businesses owners who can’t manage the books. If this resonates with you, you aren’t alone. During the first round of PPP many small business owners found themselves ineligible or unwilling because of the paperwork. You run a small business because you love your customers and the work you do. What we learned, maybe the hard way, is that we need to have our business records in order just in case of a global pandemic.

To be prepared to apply for the PPP loan this time, here is what you need:

– Photo IDs for all owners with 20% or more ownership of the business
– 2019 and 2020 Profit & Loss statements, showing revenue loss in 2020
– 2019 business tax returns
– If your business is a partnership you need to include the IRS Form 1065 and Schedule K-1
– Sole proprietors must include 1040 Schedule C
– Business Organizational Documents (ie articles of incorporation, by laws)
– Payroll Reports to include list of gross wages, paid time off and taxes assessed for all employees for all 12 months of 2020
– All 4 quarters of 2020 Employer IRS Documents
– Form 941, Employer’s Quarterly Federal Tax Return
– Form 944, Employer’s Annual Federal Tax Return
– Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
– Form W-3, Transmittal of Wage and Tax Statements
– Statements showing Health Insurance and Retirement expenses

If these are simply a print out away, good job. For those of us who have to go searching, don’t beat yourself up about it. We’re in this together. Help is here!