Editor’s Update: As of a 4/16 government report, the SBA is not currently accepting any more applications for the PPP due to the depletion of program funds. We will update this article as new information comes in regarding the status of the Paycheck Protection Program.
If your RV business has full-time, part-time, or seasonal employees, you may be eligible for a PPP loan to help cover the costs associated with payroll and running your business!
The Paycheck Protection Program was created by the recently-passed CARES Act. The PPP is a nearly $350-billion program intended to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans backed by the Small Business Administration.
What is the Paycheck Protection Program (PPP)?
Let’s break down the details:
- All small businesses with fewer than 500 employees are eligible
- The loan matures in 2 years and has an interest rate of 1%
- You won’t need to make loan payments for the first six months
- There are no collateral or personal guarantees required
- There are no loan fees
- The loan covers expenses for eight weeks starting from the loan origination date
- The loan can be completely forgiven if you meet all of the forgiveness requirements
Does my RV business qualify for PPP?
Luckily, Paycheck Protection Program loans are broader than normal SBA disaster loans, so it allows relief for small businesses, sole proprietorships, independent contractors, and self-employed folks. So there’s a good chance you qualify as an RV rental business owner!
If you consider yourself in the sole proprietor/independent contractor/self-employed bucket, there are a few stipulations you’ll need to follow in order to qualify:
- Sole proprietorships will need to submit schedules from their tax return filed (or to be filed) showing income and expenses from the sole proprietorship.
- Independent contractors will need to submit Form 1099-MISC.
- Self-employed individuals will need to submit payroll tax filings reported to the IRS.
What can I use the PPP funds for?
At least 75 percent of the PPP loan is supposed to be used to fund payroll and employee benefits costs. The other 25 percent can be spent on rent, utilities, and/or mortgage interest. The best part? If you meet these percentage requirements, your loan will be 100% forgiven.
What counts as “payroll costs”?
Qualifying payroll costs include:
- Salary, wages, commissions, or tips (capped at $100,000 annually for each employee)
- Employee benefits including costs for vacation, parental, family, medical, or sick leave allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
- State and local taxes assessed on compensation
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Even though most payroll costs are covered, these costs will not be covered:
- Payments made to independent contractors
- S corps and C corps owners who aren’t on payroll (shareholders distributions don’t count as payroll under this program)
How much funding can I receive?
The max amount you can receive from your SBA-approved lender is your monthly average payroll cost in 2019, multiplied by 2.5, up to a maximum of $10 million.
If you’re a seasonal employer, the monthly average cost will be calculated differently. The lender will use a 12-week period beginning either February 15, 2019 or March 1, 2019, and ending June 30, 2019.
New to the game? If your business didn’t exist before June 30, 2019, the lender will look at your costs in January and February 2020.
How do I apply?
If you think this program will be a good fit for your RV business, you can check out the SBA’s Lender Match tool to find an eligible SBA 7(a) lender.
As part of your application, you’ll need to provide proof of the following:
- 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
- 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
- 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
Financial documentation you’ll need
You’ll need to provide payroll/bookkeeping records to prove your payroll expenses.
Example records are:
- Payroll processor records
- Payroll tax filings
- Payroll tax forms from 2019 (Forms 941, 940 and W-3)
- Form 1099-MISC records
- Income and expenses from a sole proprietorship
If you want to get a headstart on application prep, you can check out the Paycheck Protection Program Borrower Application Form.
How can I get my loan forgiven?
In the 8 weeks after you sign your loan, any of the following expenses can be forgiven:
- Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits
- Mortgage interest—as long as the mortgage was signed before February 15, 202
- Rent—as long as the lease agreement was in effect before February 15, 2020
- Utilities—as long as service began before February 15, 2020
As we mentioned earlier, for your loan to be forgiven you must spend at least 75% of the loan amount on payroll expenses. The remaining 25% can then be spent on mortgage interest, rent, or utilities. Make sure to keep records and bookkeeping accurate so you can prove expenses to your lender!
Still want more info on the Paycheck Protection Program? Head to the PPP’s official page on the SBA’s website to get your questions answered now.
Note: This article is accurate as of publishing on 4/16. We will keep updating as new information is released.