If you’re self-employed, today is the day you can begin applying for the Paycheck Protection Program funding, and if yesterday’s NJBIA webinar on the subject is any indication, it’s best to do it quickly.
The Paycheck Protection Program (PPP) was given $349 billion by Congress to provide income to businesses and their employees, but the funding will be distributed on a first-come, first-served basis, and when it is all spent, the program will be over.
According to John Blackstock deputy district director for the Small Business Administration (SBA) covering New Jersey, more than $100 billion in loans have already been approved. Businesses began applying for loans last Friday, but according to the federal law that established the program, independent contractors, sole-proprietors and other independent workers had to wait until April 10 to begin their application process.
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“We’ve never seen anything like this,” said Blackstock.
The money is distributed through the SBA’s existing Chapter 7a loan program, which means the self-employed would have to apply through a bank or other lender that is participating in the program. New Jersey’s SBA office has been working feverishly to expand the list of approved lenders, Blackstock said. He advised applicants to work with a bank they already have a relationship with, provided it is in the SBA program. As an established customer, the process may go a little smoother, but borrowers can apply to any participating financial institution.
“I would call all of them and see if they are accepting applications,” Blackstock said.
The loans to businesses would be based on the salaries and wages they pay their employees. The process for calculating pay for the self-employed is similar, but as Blackstock explained, many independent workers see their income vary a great deal from month to month.
To calculate how much to apply for, an individual should aggregate their income for a 12-month period, and subtract anything over $100,000, which is the cap on individual salaries for the program. Then divide the total income by 12 to get a monthly average. An applicant would then multiply that average by 2.5 to get the maximum amount he or she can apply for.
Best of all, the program is designed to forgive loans to businesses that keep their employees off of unemployment, and that goes for the self-employed as well.
“The loan can be forgiven, but you have to use 75% of the proceeds for your payroll costs,” Blackstock said. “If you use anything less than 75%, that loan becomes a loan.”
How long it will take for the funds to reach the applicants’ bank account varies from bank to bank. Once the loan is approved, the institution applies to the SBA for funds to cover the loan amount. Once it receives the money from the SBA, the bank has 10 calendar days to disperse it to the borrower, Blackstock said.
“Some banks are doing it much faster than others,” he said.