What Documents Do You Need to Apply for the PPP Loan?

Your document checklist to calculate average monthly payroll for the PPP loan:

Employers: IRS Form 941 (last 4 quarters) or 2019 IRS Form 944, and 2019 IRS Form 940

☐ Independent Contractors: IRS Form 1099 for 2019

☐ Sole Proprietorships: IRS Form 1040, Schedule C

☐ Payroll/Benefits Information from January 1, 2019 to March 31, 2020 including:

☐ Breakdown per employee of gross W-2 wages paid

☐ Paid Time Off (PTO) for each employee

☐ Vacation Time paid for each employee

☐ Sick or Family Medical Leave paid for each employee

☐ State and Local Taxes assessed on each employee’s compensation

☐ Documentation of Health Insurance paid

☐ Group Health Plans – include list of participating employees and company owners

☐ Documentation of total Retirement Plan Funding paid by Employer

Check out Zions Bank SBA Paycheck Protection Program Loan Applicant Checklist.

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How do you calculate the maximum amount you can borrow?

To figure out your Loan Request, the SBA is using the following methodology:

Step 1: Aggregate payroll costs from the last twelve months for employees whose principal place of residence is the United States.

Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year

Step 3: Calculate average monthly payroll costs

Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.

Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the 9 amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

Example – If your company has no employees that make more than $100,000

Annual payroll: $120,000

Average monthly payroll: $10,000

Multiply by 2.5 = $25,000

Maximum loan amount is $25,000

View more examples using the SBA’s calculation method.

In a nutshell, take your Gross Payroll + Employer Paid Benefits.

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How do you calculate the maximum amount you can borrow?

All lenders accepting applications for the PPP are using the calculation of 2.5 times your average monthly payroll to determine your loan amount. However, the months used to calculate the average payroll are inconsistent from bank to bank. Some banks are calculating average payroll based on Jan 2019- Dec 2019 instead of the prior 12-month period specified by the CARES Act.

CEO & Attorney at Directed IRA & Directed Trust Company, Mat Sorensen, advises, “If your payroll from April 1, 2019 to March 31, 2020 is significantly higher, you could attempt to base your loan on those amounts, but you may need to file your first-quarter 941 payroll report to the IRS now so that you have a record of this amount in your loan application.”

Despite the challenges with changes in wage calculations and delay in banks offering applications, it’s not too late for you to apply to the PPP loan. When it comes to calculating payroll costs have your documentation ready and use to your bank’s guidelines in answering the application. If you need additional help with your stimulus loan application, our accounting experts are ready to help you gather the necessary documents. Click the link to view our new stimulus loan application services and get the funding your business needs.