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PPP & Owner's Draw
Posted on 4/30/20 at 4:33 pm
Posted on 4/30/20 at 4:33 pm
Are we able to apply for a loan based on Owner's Draw? I own/operate a business and applied based on employees' payroll only. I hear of independent contractors and SMB owners getting approved for PPP loans based on their own pay, but both of my local banks told me it's based on 940/941/W2s only. Can anyone shed light on a different experience?
6
Posted on 4/30/20 at 5:05 pm to Nephropidae
I applied through Regions and was only able to request monthly payroll x2.5. I asked about owner draw and was told "we are not doing that". Not sure if it was just them or not. I didn't want to hold it up shopping around trying to find a bank that would.
This post was edited on 4/30/20 at 5:06 pm
Posted on 4/30/20 at 5:05 pm to Nephropidae
You need to switch banks. For self-employed, net profit from last year’s tax return, divide by 12 times 2.5. Submit your tax return as supporting doc. If the business showed a loss, you are out of luck.
Posted on 4/30/20 at 5:09 pm to Nephropidae
quote:
Are we able to apply for a loan based on Owner's Draw? I own/operate a business and applied based on employees' payroll only. I hear of independent contractors and SMB owners getting approved for PPP loans based on their own pay, but both of my local banks told me it's based on 940/941/W2s only. Can anyone shed light on a different experience?
How are you structured? Does your business file an S Corp Return, C Corp return, or Schedule C on your 1040?
I'm assuming Schedule C.
An owner of a Schedule C company, the payroll costs are based on your 2019 Schedule C Net Income. Take your 2019 net income (limited to 100K), divide by 12, multiply times 2.5, and that's the amount you can get for the owner.
When it comes to forgiveness, payroll costs considered to be paid out is 8/52nds of your 2019 Schedule C (limited to 100K).
What banks are you talking to? There was a lot of confusion at first but this is has been pretty settled for a couple of weeks now.
Note: Owner's draw is not a technical or financial term, so it might be confusing some bankers.
This post was edited on 4/30/20 at 5:11 pm
Posted on 4/30/20 at 5:31 pm to LSUFanHouston
we originally were able to include 1099 / K1 income (owner distributions) THEN bank came back and said SBA only would take W2 salary payroll ... everything else OUT
Right or wrong that's what we went with ...
Right or wrong that's what we went with ...
Posted on 4/30/20 at 8:02 pm to Nephropidae
1120s can be used to support as well.
Posted on 4/30/20 at 8:48 pm to Nephropidae
quote:
Are we able to apply for a loan based on Owner's Draw? I own/operate a business and applied based on employees' payroll only. I hear of independent contractors and SMB owners getting approved for PPP loans based on their own pay, but both of my local banks told me it's based on 940/941/W2s only. Can anyone shed light on a different experience?
I got mine approved with owner draw as part of it..... a huge part of it.
Posted on 5/1/20 at 7:49 am to greygoose
quote:how are you structured? Mind me asking the bank?
got mine approved with owner draw as part of it..... a huge part of it.
Posted on 5/1/20 at 8:47 am to Nephropidae
Tigernnola has it correct.
I am self employed, used my schedule C, divided income by 12, then multiplied by 2.5. Approved & received money.
I am self employed, used my schedule C, divided income by 12, then multiplied by 2.5. Approved & received money.
Posted on 5/1/20 at 8:13 pm to Jacque Itchbad
I guess because we are not schedule C it didn’t work out. Just taking draw from pass through partnership LLC. Sucks and unfair because we really need funds to operate properly and I see independents who are fine regardless yet getting approved. I’m determined to get through this.
Posted on 5/2/20 at 1:39 am to Nephropidae
S-corp. BBVA
Posted on 5/2/20 at 1:53 am to Nephropidae
quote:
I guess because we are not schedule C it didn’t work out. Just taking draw from pass through partnership LLC. Sucks and unfair because we really need funds to operate properly and I see independents who are fine regardless yet getting approved. I’m determined to get through this.
Does the pass through create a tax advantage?
Posted on 5/2/20 at 2:05 pm to Nephropidae
Just to clarify, does your company file a form 1065 or a form 1120S?
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