These FAQs are based on a Q&A webinar hosted by FinGig and the SBA on August 3, 2020. None of this should be construed as tax, regulatory, legal, or accounting advice. All answers are presented as general advice with respect to the Paycheck Protection Program (PPP) and the Emergency Injury Disaster Loan (EIDL) Program. FinGig is a volunteer organization and does not provide any type of tax, regulatory, legal, or accounting advice. In all instances, please consult your tax advisor, CPA, and/or attorney for assistance with all matters involving the Small Business Administration or the Internal Revenue Service.

1. I'm trying to apply for PPP but the lender is saying that my credit score is not acceptable. Does PPP require a certain level of credit score?

 

Banks still have a credit analysis they undertake to provide a loan, and this process is unique to every bank. So one bank could reject you while the other might accept your application. We encourage you to try applying with different banks – national, regional, community, and fintech banks. As the deadline nears, we recommend that you apply through multiple banks. The way this process works is that when you apply through a bank, there is no record with the SBA till SBA approves an application. As soon as SBA approves an application with one bank, you can’t apply through another bank. It's important that you try different types of banks as they are going to have different underwriting requirements that may impact the decision for you.

 

2. I started my business on January 2, 2020. Am I eligible to apply for a PPP loan if I don't have a 2019 Schedule C?

You are still able to apply even if you don't have that 2019 Schedule C filed with IRS and you started your business in January 2020. You can provide a draft form 1040 Schedule C. You could also include your 2019 1099 MISC income form. If you did not have any business in 2019, you can send a blank form to the bank. It's also important to inform the lender that your business was not in operation in 2019.  Also, a business operating from January to the end of February 2020 forms a strong basis for showing seasonality (Check Ques. 3 for more information on seasonal businesses) in business to show lost profits.

 

3. I made significant investments in my business during 2019 and purchased a new truck along with other fixed assets which drove my amount on Form 1040, Schedule C, line 31 (Net Business Income/ Profit) down to nearly zero due to deductions. Are there any "add-backs" allowed when computing PPP?

 

Unfortunately, as per current guidelines, there is no way to have any add-backs for investments made during the financial year.

 

4. Is there any forgiveness application for the EIDL advance that I need to file?

EIDL advance: The advance feature of the EIDL is fully forgiven. The EIDL advance is automatically forgiven and you need not apply separately for forgiveness in this case.

EIDL Loan: EIDL loan is not forgivable. It is a regular loan that must be repaid as per the provided terms.

 

5. I just went off unemployment insurance. Can I now apply for PPP? When can I, if ever, go back on unemployment insurance?

 

You cannot double-dip, i.e. you cannot collect both benefits for the same period. If you’re no longer collecting unemployment, you can apply for PPP. Make sure that the period of time that you're being reimbursed for PPP loan forgiveness doesn't coincide with your unemployment insurance timeline.

 

6. I have heard the SBA will not look into loans under $2M. How does this threshold apply to sole proprietors? As a sole proprietor with a $15k PPP loan, could I be subject to an audit?

 

There may be random audits that may occur below the $2M threshold. However, if you received a loan of more than $2M, your business will be audited. It’s very important to document all your expenses on which you’re spending the loan amount. Also, the SBA guidance stipulates that you keep these records for at least 6 years in the case that the SBA have additional questions.

7. Other than PPP and EIDL, are there other resources for sole proprietors from the SBA?

 

Regular SBA loans are still available to small business owners who are sole proprietors. SBA urges you to reach out to their resource partners like Small Business Development Center, Women's Business Center, etc for options outside PPP/EIDL available for small businesses/independent contractors. Their services are offered free of cost. As an example, SBA's 504 loan program is doing remarkably well-received despite the pandemic as interest rates are very low in the current environment. SBA also provides working capital loans. As a part of SBA’s coronavirus debt relief efforts, the SBA will pay 6 months of principal, interest, and any associated fees that borrowers owe for all current 7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020.

 

8. I am a sole proprietor. As per line 31 of Schedule C, I was eligible for a PPP loan of $8,200 but the bank granted me a loan of $9,200. I was not aware of PPP loan eligibility at that time. Now when I am applying for forgiveness, how much of this amount would be forgivable? The $9,200 was due to a bank/lender error.

 

So the $8,200 would be forgivable, assuming it satisfies the conditions for forgiveness. The extra $1,000 would be a loan at one percent as per PPP loan guidelines. So you can pay back the extra $1,000 or utilize it and pay the 1% over the next 2 to 5 years, depending on when you were approved.

 

9. I am an independent contractor who has been receiving unemployment benefits. I understand that I cannot “double-dip”. I contacted my state agency once I applied for my PPP loan and asked for my state unemployment benefits to be stopped. However, I received unemployment benefits for the next period as well as my PPP loan. What should I do?

 

You need to contact your state unemployment office and let them know about your situation. Then as per state requirements for returning unemployment benefits, you need to proceed with returning the benefits for the duration of overlap with the PPP loan. Depending on how the payment was sent to you, the state can reverse the direct deposit to your bank account, void the check or remove the funds from a prepaid debit card.

 

10. My lender is asking me for a copy of a utility bill as part of my PPP application. I am currently working out of my home and don't have a utility bill with my business name on it. How should I proceed?

 

If you're a sole proprietor and are operating under a ‘doing business as’ (DBA), you would have the name of the DBA on the utility bill. Otherwise, you will have an individual’s name on the utility bill. In the latter case, if you can show an expense or a portion of that is a business expense and that the IRS would accept it, then you’re likely safe for PPP purposes. It's a part of the good faith documentation that you need to have. Keep those records for at least six years.

If you have any specific questions, feel free to reach out to us at hello@fingig.org or call us (617) 398-0544.

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