Paycheck Protection Program: Frequently Asked Questions
On March 27, 2020, President Donald Trump signed the CARES Act. This legislation provided the Small Business Administration (SBA) funding and authority to create the Paycheck Protection Program (PPP), which can provide up to 100% loan forgiveness to small businesses, including self-employed and independent contractors.
The Small Business Administration first released a useful fact sheet about the program. Recently, the SBA released more information in a guidance on the PPP for self-employed and independent contractors like Black Car drivers.
This program may be of special interest to drivers who want to continue driving, not receive unemployment, and would like to have extra money for their own compensation to make up for lost profit, vehicle leasing payments and gas money (if they have already filed their FY2019 taxes and claimed these expenses as deductions).
On this page, we have synthesized questions and answers from the fact sheet and guidance to address the concerns of drivers.
The most recently updated material will be highlighted in blue.
Last Updated 08/05/2020
- NOTICE: The PPP application expired on August 8th.
Disclaimer: This guide is not meant to constitute legal or professional advice. Please consult a lawyer for any legal advice.
On May 20th, Drivers Benefits was able to interview SBA (Small Business Administration) Long Island Regional Branch Manager Robert Piechota about the PPP and loan forgiveness. Below is the recorded interview, focused on what PPP is, and how drivers can apply.
On July 24th, Drivers Benefits was able to have another interview with SBA’s Robert Piechota, and Benigno “Sam” Ballena to hear any updates about PPP loan forgiveness. This interview touches on what expenses count towards forgiveness, best practices of applying, which application drivers should use, and what happens if a driver makes a mistake on the application.
The PPP stands for the Payroll Protection Program. It is a loan program funded by the United States federal government, administered by banks, and is intended to provide loans, some of which you don’t have to pay back, to small businesses to ensure employees stay on payroll. All loan terms and conditions are the same for everyone.
As of July 6th, there is still more than $130 billion dollars available. The program is still first-come, first-serve, so you should apply if you are interested.
Our understanding is if you’ve already applied during the second week of April and never heard back, you are already in the queue and don’t have to re-apply. We encourage you to reach out to the lender you applied to to confirm this information.
No, you cannot receive both PPP and Unemployment Insurance or Pandemic Unemployment Assistance at the same time.
If you do not have any employees, you calculate the maximum amount you can receive by:
“i. Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net profit amount (if you have not yet filed a 2019 return, fill it out and compute the value). If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
ii. Step 2: Calculate the average monthly net profit amount (divide the amount from Step 1 by 12).
iii. Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.
iv. Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance, less the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).”
Drivers Benefits Note: Below is an example created by Drivers Benefits.
Step 1: Look at 2019 IRS Form 1040, Schedule C line 31. Net profit amount: $35,000
Step 2: 35,000 divided by 12: 2,916.67
Step 3: 2,917.67 x 2.5= $7,291.67
Step 4: In this example, the driver did not apply for EIDL.
Thus, the final amount the driver who makes $35,000 a year could receive is $7,291.67
This should cover eight weeks of expenses.
There was an update to the law on June 5th, which allows you to use this money to now cover expenses for as much as 24 weeks. You are not required to use the money for more than eight weeks.
For a driver, these are the expenses a typical driver can use the PPP for during the 24-week loan period, and then not have to pay the loan back:
- Paying yourself what you have typically made in 2019.
- Paying interest payments on an auto loan for a vehicle you use to drive and pick up passengers, that were in effect since before February 15, 2020
- Paying principal leasing payments on the vehicle you use to drive and pick up passengers, that were in effect since before February 15, 2020
- Paying for gas you use while driving on the job
To be clear, you cannot pay principal payments on an auto loan with this money.
You can only use the PPP for one of these four things, however, if you claimed deductions on those expenses on your FY2019 taxes. For example, if you did not claim a deduction for gas expenses, you cannot use the PPP for gas money. But if you claimed a deduction for your leasing payments on your 2019 taxes, you can use the PPP for that.
You may also use the PPP for interest payments on debt that was charged to you before February 15, 2020. If you use the PPP for this, however, you will have to pay this part of the loan back.
After receiving an acceptance letter from the bank, it should take 7-10 days to receive the money.
All of the loan can be forgiven. The actual amount of loan forgiveness will depend on the total amount spent over the covered period on:
- Paying for your compensation
- Business expenses such as interest payments on an auto loan, payments towards vehicle lease agreements, and gas payments.
The expenses only qualify IF you deducted them from your FY2019 taxes.
As a reminder, at least 60% of the money must go towards your compensation in order to be forgiven, and all auto loans and vehicle lease contracts must have been in place before February 15, 2020. Principal payments towards auto loans are not included.
There was an extension granted in the first week of July. The loan is now open until August 8, 2020. It is unlikely to still have money by then. If you are interested you should apply as quickly as possible.
If you received your loan before June 5th, the last payment for this loan is due in two years. You may go to your lender and request an extension of up to five years.
If you received your loan after June 5th, the last payment for this loan is due in five years.
Yes. There are no prepayment penalties or fees.
Applying for PPP
You are eligible for a PPP loan if:
- You were in operation on February 15, 2020;
- You are an individual with self-employment income (such as an independent contractor or a sole proprietor);
- Your principal place of residence is in the United States; and
- You filed or will file a Form 1040 Schedule C for 2019.
Right now, we don’t know the answer to that question. The Small Business Administration said they will issue an additional guidance to answer questions for individuals who “were not in operation in 2019 but who were in operation on February 15, 2020, and (ii) will file a Form 1040 Schedule C for 2020.”
You can apply through an SBA-approved lender. This is a useful tool. Lenders are prioritizing their customers first, so you should contact your bank first.
There are also some community banks that are accepting new business customers:
Ponce Bank – find out more here and apply
Empire State Bank – find out more here and apply
SBA released this sample application form, so you can see what to expect.
You must provide the following documents:
- A copy of your FY2019 Form 1040 Schedule C. This will substantiate your applied-for PPP loan amount
- A copy of your FY2019 IRS Form 1099-MISC. This will detail nonemployee compensation received (box 7), invoice, bank statement, or book of record that establishes you are self-employed.
- A 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020.”
No. No collateral is required.
No. There is no personal guarantee requirement. However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.
As part of your application, you need to certify in good faith that:
- Current economic uncertainty makes the loan necessary to support your ongoing operations.
- The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
- You have not and will not receive another loan under this program.
- You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
- Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
- All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
- You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.
You can first go to your accountant or tax preparer. This is a fairly well-known program, so you can expect them to know about it and help prepare your documents for applying.
If you can’t go to them, you have other options. You can reach out to:
New York State Small Business Development Center. They have free financial consulting available to small business owners, and independent contractors. You can schedule an appointment here.
New York City Small Business Administration. They are offering professional help to:
- Understand which loan is best suited for their needs
- Review and put together loan documents
- Calculate loan repayment terms
- Connect with multiple lenders – including banks, credit unions, non-profit lenders and the Small Business Administration (SBA)
- Prepare SBA loan forgiveness documents
- Understand loan payment deferment options
You can request help here.
Getting My PPP Loan Forgiven
If you would like your loan to be forgiven because you used the loan for covered expenses, you must request this to the bank you’re borrowing from. This request must include:
- Documents that verify the number of full-time equivalent employees (for most drivers that is just you) and pay rates,
- Documents that show the payments on eligible expenses such as interest on an auto loan, vehicle lease payments, and gas money.
You will also have to certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible interest, leasing, and utility payments.
Once you make this request with the documents, the lender must make a decision on the forgiveness within 60 days.
Since each bank may have a different process, you should ask the bank about this process more.
You must submit evidence that over the covered period of the loan that you used the money from PPP on covered expenses.
The interest rate is 1%.
You can defer payment for six months.
The Treasury Department has continued to update the application. You should go to their website linked here to find the most recent one.
If you applied as a self-employed individual, independent contractor, or sole proprietor, yes you are.
This loan forgiveness application is named “PPP Loan Forgiveness Application Form 3508EZ”. This application is only two pages and requires less paperwork.
In a recently released guidance, The Treasury Department indicated it could take up to five months. Forbes wrote, “Once you file the forgiveness application with your bank, it will have 60 days to review it and let you know the amount of forgiveness. The bank will then notify the SBA of the amount of forgiveness and the SBA will have 90 days to approve the bank’s decision.”
Yes, you can challenge it. We don’t know yet how to do so.
According to the regulation, you will first make the calculation in good faith. The lender and SBA will then review it.
Yes, the new guidance caps the payroll expense limit to be $15,385 for self-employed individuals.
The Small Business Administration is requiring all borrowers to keep files and paperwork on PPP loans for six years.The regulation reads:
“As noted on the Loan Forgiveness Application Form, the borrower must retain PPP documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request from the time of application.”