How to Get a PPP Loan for Your New Business


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If you have a business that was started prior to 1/1/2019, the process to apply for a PPP1 or PPP2 loan is more straightforward. It does vary based on the type of entity that you have. 
If your business starts part-way through 2019 or in the beginning of 2020, you still may be able to get a PPP loan.  

Sole Proprietorships and Independent Contractors – PPP Loans 

Sole proprietorships, contractors, and gig-workers are eligible for a PPP loan based on their 2019 Schedule C or 1099 MISC-forms. 

For contractors, if you began operations after June 30, 2019, you can apply for the PPP using your 1099-MISC forms from January 1 to February 29, 2020. 

Sole proprietorships that began after June 30, 2019 can prepare a preliminary Schedule C for January 1 to February 29, 2020.  

The amount of your PPP1 loan is calculated as 2.5 times your average monthly net income. You can find this amount by taking your net income over those months, dividing by the number by the number of months to get the average, then multiplying it by 2.5. 

This loan amount can be fully forgiven over a 24-week period. You will need to file a forgiveness form with your lender, but wait to use the new easy form that hasn’t yet been released (as of 12/31/2020).  

The PPP2 loan is available if you have 300 or fewer employees, have already taken a PPP1 loan and if the gross receipts for any quarter in 2020 are 25% or more lower than the gross receipts for the corresponding quarter in 2019. 
PPP1 and PPP2 loans are available through participating banks and approved Fintech companies.  

See CoronaTax and SBA Loans. What You Don’t Know Can Cost You for a list of Fintech companies that were approved for the last go round.

Partnerships and PPP 

For partnerships, you will be limited to a PPP loan amount based solely on your payroll numbers and guaranteed payments that have been reported on Schedule K-1s for partner/worker 

To find the value of your PPP loan if your partnership was begun partway through 2019, you can use the portion you have plus your payroll numbers from January 1 to February 29, 2020 to find your payroll average. Since you won’t have the Schedule K-1 prepared yet for the guaranteed payment, be prepared to show proof that you made a payment to the partner(s) in question by having copies of bank statements if requested. 
Take your total from those months and divide it by the number of months then multiply by 2.5 to find your loan amount. Payments to contractors, and any draws or distributions would not be considered payroll costs. 

This loan amount can be fully forgiven over a 24-week period. You will need to file a forgiveness form with your lender, but wait to use the new easy form that hasen’t yet been released as of 12/31/2020.  

The PPP2 loan is available if you have 300 or fewer employees, have already taken a PPP1 loan and if the gross receipts for any quarter in 2020 are 25% or more lower than the gross receipts for the corresponding quarter in 2019
PPP1 and PPP2 loans are available through participating banks and approved Fintech companies.  

Corps and C Corps and PPP Loans 

You will be limited to a PPP loan amount based solely on your payroll numbers.  

Just like with the previous examples, if your business was begun in 2019, use the portion you have plus your payroll numbers from January 1 to February 29, 2020 and divide by the number of months and then multiply by 2.5 to find your loan amount.  

Payments to contractors, and any draws or distributions would not be considered payroll costs. 

What If the Business Was Begun in 2020? 

If your business doesn’t have any 2019 income, then follow the guidelines above for January 1 to February 29, 2020. Divide the total by 2 and then multiply by 2.5 to find your loan amount.  

What About a Potential Third Round of PPP Funding? 

There is talk about a third round of PPP funding that may be coming in 2021. Hopefully it will expand to cover more businesses that had been begun in 2020. 
The latest bill of CoronaTax still has to be interpreted by the IRS, SBA and other agencies. Stay flexible. This isn’t over yet.  



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