You’ve reviewed the Paycheck Protection Program summary, double-checked the newest guidance and pointers, determined you’re eligible, and reached out to your bank or lender. Now what?

Here is a list of documents to pull together so you have them ready for the application.

1) Articles of Incorporation (S-Corp or C-Corp) or Articles of Organization (Single- or Multi-Member LLC) – note: non-LLC sole proprietorships and partnerships may not have anything like this; they may have an Operating Agreement or Partnership Agreement that will suffice.

2) EIN Letter – almost every company has one of these at this point, as they are now required to open a business bank account; but if you are a sole proprietor who uses their Social Security number to file taxes and runs things through a personal bank account (not recommended), you may not have one.

3) Average monthly payroll calculation – seems like it would be easy, but it actually can be kind of complicated. I’m going to try to break it down.

First, figure out what date range you’ll need to use. You can choose from a bunch of different ones to calculate your monthly average (for Gusto users – they now allow you to change the date range on the PPP report):

a) 2019 calendar year.
b) Most recent 12-month period before your loan application.

Most businesses will select either (a) or (b).

Pro tip: If you’re trying to get the highest loan possible, pick the period that is higher. If you’re worried about hitting 75% of your prior-year monthly average, pick the period that is lower.

c) Seasonal business that has its highest payroll this time of year: use info between February 15, 2019 and June 30, 2019.
d) New businesses, or ones that expanded this year (i.e., FTEs and payroll were higher during the first part of 2020 than they were during the other acceptable reporting periods): use the alternative reporting period of Jan 1-Feb 15, 2020.

Second, if you use a payroll processor; and are on payroll yourself (S-Corp or C-Corp); and your health insurance, retirement and other benefits are tracked through your payroll system; then you should be able to simply run a report specific to the PPP through them. Change the date range if needed and you’re done with this step. (Yay!)

If you have employees (or you are an employee of your own company) but do not use a payroll processor, or your payroll processor doesn’t have this report for you, then you’ll have to calculate this yourself (and switch to Gusto as soon as this is over). Take the 12-month total for the period you chose above (if you’re using the 2019 calendar year, just take Box 5 from each employee’s W-2) and follow the steps in this article, under “How did you calculate my average monthly payroll costs?“

If you are a sole proprietor and do not have employees, then you have two options for calculating the average monthly “payroll”. Either take the amount on Line 3 on Schedule SE from your 2019 tax return, or take the Net Income from your reconciled QuickBooks Profit & Loss report for whichever date range you selected above. Add health insurance and retirement benefits. Divide by 12. (Make sure you attach the calculations when you fill out the application.)

Lastly, if you are a partner in a partnership and do not have employees, then you have two options for calculating the average monthly “payroll”. Take the amount on Line 3 on Schedule SE from each partner’s 2019 tax return, or use the company’s reconciled QuickBooks Profit & Loss report to find each partner’s Guaranteed Payments, plus their ownership percentage times the Net Income — this second method is complicated enough that you may want to reach out to your bookkeeper or accountant for assistance if you choose it. Add health insurance and retirement benefits. Divide by 12. (Make sure you attach the calculations when you fill out the application.)

Pro tip: If you’re trying to get the highest loan possible, pick the method that is higher. If you’re worried about hitting 75% of your prior-year monthly average, pick the method that is lower.

4) Payroll Reports – if you have employees. Print these payroll reports from Gusto or ADP (or whatever payroll provider you use).

2019 all four quarters:
IRS 941
IDOR IL-941
IDES 3/40

2020 first quarter:
IRS 941
IDOR IL-941
IDES 3/40

2019 annual:
IRS W-2s
IRS 940

5) Health insurance and retirement contribution invoices – to support info reported by your payroll software; you will probably not need these until you apply for forgiveness, but pulling them now will help ensure that you’re reporting the correct amount of benefits with your average monthly payroll costs.

6) SBA Borrower Application Form — not the “Lender” Form! I’ve had bankers give more than one client the Lender Form accidentally (which is the form the banker is supposed to fill out and submit with your application). Here’s a sample, which you may want to fill out while you’re waiting for the lender to contact you. However, it’s likely that they’ll make you fill out their own copy when the time comes.

7) Monthly Rent and Utilities – some lenders are also asking for this info in anticipation of eventually applying for forgiveness, but it does not figure into the calculation of your actual loan. The loan itself is simply 2.5 times your monthly average payroll cost. Also, remember that you will only be able to spend 25% of the loan on rent and utilities in order to have the loan forgiven.

That’s it! There you go. Easy peasy, lemon squeezy.

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