Check this new SBA info on how to calculate PPP loan amount

Check this new SBA info on how to calculate PPP loan amount
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The second round of the Paycheck Protection Program (PPP) opened on Monday. However, the login issues and sluggish system marred the whole process. The presence of such issues means you will likely get some more time to submit your application. You can use your time to re-check your application, including verifying the PPP loan amount calculation based on the additional information from the SBA.

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Additional information from SBA

Over the last few days, the U.S. Small Business Administration (SBA) came up with additional information on how to calculate the PPP loan amount. These new guidelines include information for Self-employed individuals with (and without) employees, Partnerships, S and C corporations, Eligible not-for-profit organizations, LLC and more.

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The SBA has added this additional information to the PPP Q&A document, which was initially published on April 3. The newly added information (questions 32–36) clears up the following details:

  • Any housing stipend or allowance given to an employee will be included for calculating the payroll costs, but is subjected to a limitation of $100,000 annual compensation per employee.
  • To determine an employee’s principal place of residence, a PPP applicant and lenders may use the principal residence rules in Regs. Sec. 1.121-1(b)(2).
  • The additional information also details the eligibility of PPP loans for agricultural producers, farmers, ranchers, and agricultural and other forms of cooperatives.
  • SBA has also cleared whether all or only full-time-equivalent employees should be considered for the 500-employee threshold.

Apart from these, the Treasury came out with new information for seasonal employers. Initially, seasonal employers were asked to use the monthly average payroll from Feb. 15, 2019, to June 30, 2019 (or March 1, 2019, to June 30, 2019) for calculating the loan amount.

Now, the Treasury notes that for many seasonal employers the season starts later in the year. Thus, as per the new guidelines, the seasonal employers can now use an alternate base period, or any consecutive 12-week period between May 1, 2019, and Sept. 15, 2019.

How to calculate PPP loan amount?

As to how to calculate your PPP loan amount, it basically includes the average monthly cost of the salaries of you and your employees. For sole proprietorship, the PPP loan amount will be calculated using the business’ net profit.

The salary of the owner will depend on the way the business is taxed. For instance, if your company is taxed as an LLC, then the owner’s salary will be the amount in which the self-employment tax was paid in 2019.

The maximum amount of salary for you and your employee is $100,000. This means if you (or your employee) earn more than that, then you can claim for $100,000 only. However, you can add other payroll expenses over this $100,000 cap, such as health insurance, retirement contributions, severance pay, paid sick leave, and vacation pay.

If your business existed even before 2019, then calculating average payroll cost is simple. All you have to do is divide the total payroll expenses for 2019 by 12 to arrive at a monthly average.

In case you started the business in 2019, then you will have to consider a few more things. For the businesses existing prior to June 30, 2019, they should consider their twelve months payroll expenses, and divide it by 12 to come up with the average monthly payroll cost. If your business started after June 30, 2019, then you could either use your 2019 annual total and divide by 12, or the payroll expenses from January 1, 2020 to February 29, 2020, and divide it by 2 to arrive at a monthly average.

Where to get payroll information?

You can easily get your payroll report through your payroll provider. In fact, many payroll providers are offering “PPP reports,” which offers all the information you need for the loan application.

Those who are self-employed, and have filed their 2019 tax return, can refer to their Schedule C for the net profit. If you haven’t completed Schedule C yet, then you first need to submit it to be eligible for the PPP loan.

The PPP loans are targeted for small businesses which were in operation as of Feb. 15. To qualify as a small business, your business should have 500 or fewer employees. As per the SBA, a few businesses in some industries will also qualify for a PPP loan even if they have more than 500 employees.

The businesses that qualify for a PPP loan include sole proprietorship, independent contractors, veterans’ organizations, self-employed individuals, tribal concerns, independent contractors and not-for-profits.

The second round of the PPP program, called the Paycheck Protection Program and Health Care Enhancement Act, was approved last week. This new program adds $310 billion to the PPP program after the initial $349 billion became exhausted in just 12 days. The $310 billion funding includes $60 billion for the small, midsize and community banks.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at
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