Would you like to know if you are eligible for the SBA Paycheck Protection Program Loan because I will show you the exact process to apply for it with Kabbage?
Are you ready to see how to apply for the Paycheck Protection Program Loan through the small business administration, which gives a 1% interest loan over two years that can be totally forgiven.
This is available for self-employed independent contractors and for small businesses under 500 employees as a part of the Corona virus aid relief and economic security act that was recently passed in the USA.
What I'll do here is show you the exact application process I just went through yesterday to apply for my loan via Kabbage, which I've had a line of credit with them for a year or two now.
They make it super easy.
You can easily do and have the application completed in five minutes or less.
What we'll begin with is an explanation of what exactly this loan is, if you are new to it, and how you can be eligible for, then we'll go through the actual application.
Let's take a look at the website on Kabbage.com.
Kabbage has set up their entire business to now apply for these loans with you. They have changed their business model from doing lines of credits to focusing totally on this because Kabbage or anyone else that makes these loans as a lender gets a percentage of the loan from the federal government making it a lucrative opportunity to assist with.
Here's how the loans work.
The loans are available for 2.5 times your average monthly payroll. If you are self-employed, from what I've read, that means your income from last year off of your taxes before any expenses is what you can use to calculate it.
If you're actually paying people, this is what you're paying your employees. If the employees are kept on the payroll, the SBA will actually forgive the portion of the loans that's used for rent, mortgage interest or utilities, which means you don't even have to potentially repay that back.
All of this could be subject to change at any time as this is all brand new. This is the state of it is as of April 5th, 2020.
All the payments, principal, interest and fees are deferred for six months, which is awesome.
However, interest does accrue.
The amount that is not forgiven will be treated as a two-year loan with a 1% fixed interest rate, which is a really good deal, especially if you've got loans at a lot higher interest rate.
All you need to do is submit your application, showing the five-minute process I'll walk you through. Kabbage will calculate how much you're eligible for. Then you can take your loan when you're approved.
Note, as it says on the Kabbage website, they're not currently an authorized lender. However, the SBA has made a special program available to designate people and organizations who are not generally lenders to distribute these loans, and I imagine Kabbage will be able to do this as well as any other lenders very shortly.
Normally, you have to be a bank or some institution available and prepared and certified or whatever it is by the SBA to give out loans, but you do not for these loans.
What you need to look at before applying is the whole FAQ section and the Ultimate Guide to Paycheck Protection Program Loans.
I read through this whole thing because I was thinking that I don't have any actual employees and am I really eligible for this?
According to what it says, I'm clearly eligible for it and it explains how this works. It's available as a part of the Coronavirus Aid, Relief and Economic Security Act (CARES).
The part of it that alligator $349 billion for small business loans under 500 employees.
I already talked about how it's two and a half times the average monthly payroll during the year preceding the application. That means 2019. Maximum loan of 10 million.
If the employers maintain their payroll, then you can have that part of the loan forgiven. I'm curious for self-employed, can I just pay myself that and that counts?
I wonder how that works and even if they can't work for some reason, a 1% interest loan sounds great.
Here are the small businesses.
You have to be an operational on February 15, 2020, to be eligible for this, you also have to be in the USA.
These are the businesses that are eligible.
Small business with fewer than 500 employees.
Number two, a small business that makes the SBA's size requirements.
Here's the key one for me and for a lot of you that are likely to be watching this: Sole proprietors, independent contractors, and self-employed individuals who regularly carry on any trade or business including those in the "gig economy."
I've made this because I know there are a lot of you who are watching my YouTube channel that fit into that definition.
You can also be a hospitality or food service business, a nonprofit entity, a veterans' organization or tribal business.
One of the most important one here for most of us is "Sole proprietors, independent contractors, and self-employed individuals who regularly carry on any trade or business."
That is me.
Then, we scroll down farther here.
How much funding can I access?
The maximum is 250% of your average monthly payroll from the preceding year. For self-employed, how exactly do you calculate that?
We'll scroll down and find more.
How can you use it?
You can use it to fund payroll costs, employee salaries, cost related to group health care benefits, insurance premiums, mortgage interest payment, rent, utilities, and any other interest on any other debt obligation, which is cool.
When can I apply?
You can start applying April 3, 2020, for small businesses and sole proprietorships, which I think that's me.
Then you've got independent contractors and self-employed.
I have had a business, which is designated as a sole proprietor for a long time.
I think I can apply. I already did my application with Kabbage and worst case scenario, they'll just submit it later.
What information do you need to apply?
We're going to go through that right now. You will need to have if you are self-employed, your tax return so you can show what your earnings were for the previous year.
If you've got 1099-MISC that you get, you can use those. We'll see all of this in just a few minutes.
What I'm wondering about is, how exactly do you have your income calculated if you're self-employed?
You do not need to pledge any collateral. You don't need to personally guarantee this loan, which is cool.
You don't need to look for other funds.
Normally, you do have to do that stuff for an SBA loan and you can get it if you have another SBA loan.
However, if you already got an Economic Injury Disaster loan, you can't use your PPP loan for the exact same purpose.
You can also apply for an Economic Injury Disaster loan. I have not applied for one of those.
No personal guarantee is required for the Economic Injury Disaster loans and we're not going through those here.
You can only get one of these kinds of loans.
However, I think my wife could potentially apply for one of these if she wanted to.
If you're married filing jointly and you each have your own business, I think you can do it.
The program's open until June 30.
I'm doing this video right away because I imagine lots of people are applying for this and you probably want to apply early.
If the money runs out, I doubt there will be any more loans available.
Your loans can be forgiven if they're used to cover payroll costs, which is interesting.
Do I just take the loan into my account for my business and transfer to my personal account and say, "Well, I paid myself."
That is very interesting to me. If that is how it works, that would be wonderful.
You can have your loan forgiven if it's paid on these specific types of payments. The key thing is the interest rate is so low and if you expect to use it on any of these, especially payroll interest on mortgage rent on a leasing agreement, payment on utilities or additional wages, then that can even be forgiven. You don't even need to repay that, which is awesome.
If we scroll down here, you can request forgiveness once you've got the loan.
We're just focusing on applying for a loan. Obviously there's a process to go through for the forgiveness. If you were wondering, "Okay, well, I can apply for 2.5 times of my monthly payroll and other costs, but only eight weeks of expenses are forgivable."
Yes, you actually do not get to have the entire loan forgiven. You can only do up to, not that last 50% of the loan. So the loan can be 250% of the monthly payroll. Thus, that one 50% is not forgivable.
It's just eight weeks, so the 200% of monthly payroll can be forgiven, but you will have to pay that last 50% back.
The interest rate only has a rate of 1%, which is incredible that you don't even have to start paying making payments on for six months.
However, the interest does accrue and it's due in two years.
What I'm considering, it says lots more on what expenses are eligible here. If you look at it, what counts as payroll?
Obviously salaries, wages, commission or tips. If you're paying someone, then that counts as payroll and employee benefits count.
Here's what I'm caring about.
"For a sole proprietor, independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee."
That is really cool.
That means that it is just the income number before expenses. As far as I can see, which means you can't do more than a hundred thousand, therefore it's capped at a maximum of $100,000. Then you should be able to give yourself about the exact same loan as me, if you made at least that much, which that is really cool.
These are some limitations.
You can't use this to pay for somebody outside the United States. If you have a foreign contractor employee, if they live outside the US you cannot use this to pay them.
You also cannot pay a salary more than a hundred thousand dollars with this, and there are a couple other things here.
Do independent contractors count?
Now, if you're paying someone as an independent contractor, they do not count for this because they have the ability to apply for it themselves. That is a very important distinction.
You can't apply for this for all the independent contractors you have working for you, and then give it to them. They must actually apply for it themselves, which means if you're an independent contractor, you need to apply for this loan yourself.
Then I think we've looked at enough of this now to get the eligibility clearly on it.
I'm still wondering if for the payroll I'd just transfer the money into my bank as self-employed?
That's my payroll. That sounds good to me.
Let's take a look at the actual loan application of this.
This is the amount I was qualified for based on two and a half times. That is a quarter of a year, which makes sense based on my taxes last year.
I'm eligible, it says, for a loan of $22,997.50, which I think at 1% interest, possibly forgivable just to pay myself.
That sounds absolutely miraculous and that's why we want to do this loan application.
Here's the exact process.
I've told you about it all up front, so you know exactly what you're getting into. Rather you're eligible for or not.
Let's take a look at the actual application process. It's super quick.
You're on Kabbage's website. You go to that page over here, the one that had "view FAQ" and you hit "Apply Now."
You will need to sign up for an account if you don't have one already, which you probably don't.
Next, this is what it starts off with.
Does your business classify any of the following?
I selected "Eligible self-employed individual."
Next, number of employees you have.
It has to be a minimum number of one. You do count yourself as an employee if you're self-employed, you count as one employee.
If you put zero in, it will make you put at least one in. You can put up to 499 if you actually have up to 499 and this has to be as of February 15, 2020.
You can't all of a sudden hire a whole bunch of people and do this.
Next, it will ask you these questions to verify that you are eligible for it.
Have you been suspended, declared ineligible or you can see these yourself here.
The key things, if you are presently involved in bankruptcy or excluded from participation by a federal agency, if you've had any business loan from the SBA or federal agency that's been delinquent in the last seven years, you cannot apply for this.
If you have any other owners, they also need to be included and considered in the loan. This means if someone you're working with is not eligible in your business, you may not be eligible either. If you've already got an Economic Injury Disaster loan that needs to be reported as well.
Once you answer those questions, you'll get your loan eligibility information here.
That looks absolutely wonderful to me that I am looking forward to getting that in my bank account along with the stimulus payment and everything else.
How awesome is that?
Let's look at, what is the purpose of this loan?
You can check any of these or "other."
I check "Payroll" because that's the primary purpose to give myself a payroll.
What percentage of the business do you own?
I'll show you farther along in that.
I own 100% of the business. It's just me. That simple.
There, we have more questions for you to look at and consider.
"Is the applicant or any individual owning 20% or more of the equity subject to criminal information, arraignment, criminal charges."
"If you are incarcerated or currently have some kind of criminal charges brought about against you," then you may not be eligible for this. "If you've been convicted of a felony or some of these other criminal actions," you may not be eligible for this either.
"You must be the principal place of residence for all the employees included in a payroll application above" and I'm not in the franchise directory, that does not apply to me.
Next step, you need to check each of these boxes.
You need to check these in good faith.
First, "the applicant was in operation on February 15, 2020."
If your business was not in operation at that time, you cannot apply for this.
Number two, "The current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant."
Definitely. I am seeing that this is a lot of economic uncertainty and I am very grateful for the opportunity to apply for this loan because people's spending patterns has changed a lot.
I had the venue booked and was prepared to start a mastermind that was going to make thousands of dollars and will make thousands of dollars a month once we got it started. That blocked me being able to do that. That's also my next big expansion, so you do need to check "the current economic uncertainty makes this loan requests necessary to support the ongoing operations of the applicant."
That's easy to say for me.
Next, "The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments and utility payments."
"I understand that if the funds are used for unauthorized purposes, the federal government may hold me liable."
If you are an independent contractor, theoretically, that means that it's used to do your own payroll, which that seems cool to me, and you've also got other things that can be used for.
The next one, "The applicant will provide the lender documentation verifying the full time equivalent employees on the payroll as well as the amounts covered. You need to agree that once you get this loan, you'll need to document who exactly is getting paid and how much they're getting paid."
Then, "You understand the loan forgiveness will be provided for the documented sum of the payroll costs, mortgage interest, rent payments, utilities, et cetera."
Scroll down here.
You've got three more things to agree to.
"During the period, the applicant will not receive any other loan under the paycheck information program."
"You certify that the information provided here is true and accurate in all respects," and you don't want to mess around with the federal government and lie about stuff like this.
"You acknowledge the lender will confirm the eligible loan about using the documents submitted," which means when I submit this to Kabbage, they're going to do the work to get me the loan for this.
Once you've submitted all of that, you'll be at the last step.
It will confirm that with your Kabbage account, your business name, your address, the structure, the date established, the industry you're in. It'll have your social security number, date of birth and address.
You check your box again that you've read through these final rules.
Once this is done, you will pop up and get this screen saying you're eligible for this loan amount.
All I needed to do is upload two documents to move forward.
First, I needed a phone bill showing my phone number tied to my business address.
I uploaded my phone bill here, and then the second step is, I needed to upload my income taxes.
You will need to upload your 1040, especially with the Schedule C to verify if you're self-employed or an independent contractor, what your income was from 2019 to put this up there.
If you've got a business that is a corporation, you may need to upload different documents to support that.
Once you've got that done, that's it.
Now I just sit back and wait for Kabbage to do their work, getting prepared to make these loans on my behalf and I wait until they ask for any further documentation, and wait to get the money into my bank account.
I'm very grateful for the chance to educate you about this today.
I hope this is very helpful for you if you're looking at how to apply for the Paycheck Protection Program.
I've given you every single detail I could find about it online that's relevant for you.
I read through the FAQ, done the entire application for you here, took screenshots of it to make this process easier for you.
I appreciate you watching this or reading the blog post.
If you are new to my channel and you made it all the way to the end of the video. You're going to love the new videos I do every single day.
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I trust when you want some more amazing videos like this, you hit that subscribe button and turn those notifications on.
If you'd like to learn more with me, I've got a lot of online courses on my website you'll find really helpful.
Go to Jerrybanfield.com and use the coupon code FREE333 and you'll be able to take any course with me totally for free.
If you want to call and ask me some questions, jump on Zoom, go to my Jerrybanfield.com/call page and hop on a Zoom call with me.
There are group calls or individual calls, and you can get a lot more one-on-one or group help there.
Thank you for reading all the way to the end of this.
I love you.
You're awesome and I'll see you in the next video.
Love,
Jerry Banfield
Edits from video transcript by Michel Gerard.
