Transcript
Hi everyone, I just wanted to create a quick video for independent contractors and self-employed relating to the Paycheck Protection Loan Program.
Loan Assistance for Independent Contractors and Self-Employed opens Friday, April 10
Starting this Friday, April 10th, if you are an independent contractor or self-employed you can also apply for this loan program. My suggestion is first, reach out to your banks now and understand what their application process is. For the past week and a half the small business community and sole-proprietors have been applying online and every bank has been different. So, definitely, reach out to your bank. Secondly, for you, your income, some of the banks are going to request supporting documentation. They are probably going to look for 1099’s from 2019 that you received because that’s going to support your revenue number. And then, in the application process, you may see something that’s called an EIDL. That stands for the Economic Injury Disaster Loan. This is a second loan that’s administered by the SBA so if you go to the SBA website you’ll see this. I call this the “$10,000 loan”. If you applied for that, and you got the funds, make sure you capture those funds and be ready to note that in the application. But, again, this video strictly relates to the paycheck protection program.
Calculating your Loan Amount
If you were an independent contractor or self-employed in 2019 on your personal tax return, your 1040 Schedule-C, you would get a lot of this information. I created this example here to show you your total revenue, your starting point is your total revenue, and this is the sum of all 1099s you received from your customers, including clients that you did work for, in addition to any other revenue that you earned in 2019. That’s going to be your starting point.
Then, you may have incurred expenses. Maybe you had legal and professional fees, maybe you had your cell phone expenses, marketing expenses. I just made a couple of examples here for you. You want to make sure that those expenses get reduced from your income. So, here’s your total expenses (line 27), and here is all the income that you made (line 16), and this is for a 12-month period. I’m assuming this is 2019. Then, you take your gross income, you subtract your expenses, you get your net income. The loan cap for this program, per individual, is $100,000. You will take the lesser amount (of either your net income or the $100,000 loan cap) and divide that by 12. That will get you your monthly payroll, which is $8,333 (line 32). Take that amount and multiply by 2.5 – to arrive at your loan amount.
So, let’s say your (net income) was $90,000.
Net Income: $90,000. Divide this by 12 (months in the year).
Monthly Net Income/Payroll: $7,500. Multiply this by 2.5 (magic loan math)
Loan Amount: $18,750.
Every Bank is Different: Make sure to contact your bank to understand their application requirements
Again, if you are an independent contractor or self-employed the application is open this Friday, April 10. Make sure you contact your bank – on the applications it will ask for this type of information so you want to make sure you have this available now. Every bank is different in terms of the 12-month period. We’ve been using 2019 because that’s supportable through the 1099s that you received but we know that other independent contractor or self-employed may you February 2020 and go back to March 1, 2019 to figure out that 12-month period.
We’re here to help.
If you have any questions, let me know!
Resources
Paycheck Protection Loan/Forgiveness Calculator Worksheet, (XLS)
The Paycheck Protection Loan is an SBA loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis. This worksheet will help you determine the amount of the loan that will be forgiven.
Make sure to check out our list of lending options available to start-ups and small businesses.