Forgivable Loan from the Government

As of approximately May 5, 2021, the PPP program is out of money and not accepting new applications except in limited circumstances.

Did you know that you may be eligible for a forgivable loan from the government. That is right, you can take out the loan, use it for certain reasons (including, potentially, paying yourself) and then have it forgiven. Yes, there are a lot of tests to pass and rules to follow. Also a lot of paperwork. While the maximum loan size is $10MM for business with hundreds of employees, a simple 1099 contractor or single person business (eg, an Uber driver, eBay seller, outside consultant, etc) can get a smaller loan. If you are a one person home-based business with a net income of over $100,000 in 2019, you can get a loan of $20,833, of which $15,384 may be forgiven. This would get scaled down pro rata to the degree your income was under $100k. If you file a schedule C, you would look at line 31 of your schedule C in 2019 for the relative income amount. For example, if your income was $50k, then you would get a $10,416 loan, $7,692 of which would be forgiven. If you have employees other than yourself and/or certain overheads (office mortgage, office rent and/or office utilities), these numbers can be much higher (up to $10MM). You also can’t be too big, no more than 500 employees with some exceptions. Of course there is a lot of fine print which you can read about through the links below.

Any amount that is not forgiven with be subject to an ultra low 1% interest rate and need to be paid back within 2 years. There are no fees to take out the loan or pay it back. There are no fees at all (other than the 1% interest rate) if you follow the rules and make any required payments on time.

In the first round, almost all of this money seemed to go to businesses that had a strong relationship with their bank. Now the “FinTechs” are allowed to provide loans which should help the “little guy” get his or her share.

Also, time is of the essence here. The first “$350 billion” went very quickly. Congress is expected to put more money into the kitty imminently, but it may go even quicker as there are a lot of borrowers that missed the last round that have already gone through the initial process with their bank.

For more details on loan and forgiveness requirements, see the following:

• Department of the Treasury's Top-line Overview of PPP
• Department of the Treasury's PPP Fact Sheet
• Sample Loan Application Form - note that this is a form produced by the government, however, each bank will likely have its own form. Feel free to fill this out to get the information ready, but know that you may need to retype the information into the bank's website.

For even deeper nitty gritty, see:

• Department of the Treasury's Interim Final Rule #1
• Department of the Treasury's Interim Final Rule #2
• Department of the Treasury's Frequently Asked Questions - note that many of these "frequently" asked questions relate to the lender side or may seem like fairly complex questions by larger businesses trying to fit into the program.
• Full text of the CARES Act - While this may be a good antidote for insomnia, you will probably get more actionable information from Treasury's rules than from the original text of the law. The rules include "interpretations" by the Treasury Department of this law that may not be the same interpretations you may have made. For example, Treasury decided to limit non-payroll related costs (e.g., rent, mortgage interest and utilities) to 25% of your forgiveness. There is no mention of this 25% rule in the law.