Those who are self-employed have wondered since the Paycheck Protection Program was introduced whether or not they would be eligible for loan forgiveness.
Good news: under the newest revisions those who are self-employed, freelancers, and independent contractors with the maximum PPP loan amount, based on 2.5 times their 2019 monthly income, are eligible for full forgiveness.
If you fall into any of these categories, here’s what you need to know.
Key Changes To PPP Made By The Flexibility Act of 2020
- Loans approved after June 5th the maturity date was extended from 2 to 5 years. Loans approved before June 5th can be extended by the lender, but is not required.
- The loan forgiveness period was extended from 8 weeks to 24 weeks.
- The amount needed to spend on payroll for forgiveness was reduced from 75% to 60%. If you don’t reach 60%, you are still eligible for partial forgiveness.
- The date to replace full-time employees and restore salaries was extended from June 30th to December 31st, 2020.
Guidelines on calculating owner compensation, employee compensation, and non-payroll costs were also released this week.
Calculating Owner Compensation:
8 week covered period – Eight weeks of 2019 net profit (up to $15,385)
24-week covered period – 2.5 months of 2019 net profit (up to $20,833)
Calculating Employee Compensation:
Payroll costs are capped at $100,000 of annualized pay. This includes salary, wages, and tips. But now with the 24 week extension, the max cap per individual has been increased from $15,385 to $46,154. Calculation: $100,000/52 *24
Non-Payroll Expenses:
Loan forgiveness for non-payroll expenses has also been extended from 8 weeks to 24. These expenses include covered mortgage obligations, covered rent obligations, and covered utility payments.
A revised full loan application was released along with a new EZ Version.
If you haven’t applied for your PPP loan yet, there is still funding available, but you need to apply before the end of the month.
More details and links to both loan applications are available here.