PPP Me or Leave it Be?
April 11, 2020 2:47 PM   Subscribe

Should I refrain from applying for the Paycheck Protection Program loan for my sole proprietorship because I have personal savings and "don't need it" as much as others, even though I have lost all of my confirmed work due directly to Covid-19? This my entire business and my only income, as I am not W2 or an employee of any other business.

The work I do for clients involve traveling 90% of the time to attend on-site meetings so, naturally, all of the work I had through the summer has been canceled (literally in one day in mid-March). A number of my clients are working on ways to do this work virtually, and I will certainly get some work this summer, but there is a drastically reduced amount of this work to go around and most of my clients are staffing their internal folks first. So, while I won't be completely out of work I would guess that I will have 80% less work. So far I've had two weeks of no work and nothing scheduled for the future (generally I am scheduled anywhere from 8-2 weeks out). Before Covid-19 I had enough work offered to me to work every week if I wanted.

My largest client/source of income has told me that their work has been mainly postponed until next year. It also sent out an email to all of its independent contractors like me suggesting that we apply for the PPP program. My business bank has already sent me an email opening me up to apply through it, so that should not be an issue.

Having been in business for myself for many years I have gone through downturns and am used to uneven income throughout the year. Because of this I have a cushion of personal savings that I've built up over the past years. My live-in partner (who does the same work as me and is also facing a limited availability of work) will not apply. They believe taking part in the program is "hypocritical" because we are liberal and believe in supporting those less fortunate and that "others need it more" than me. While I too always want to be self supporting and to leave government programs to those that need more support and are less privileged, I feel that it is in my business's best interest to apply so that I can continue to pay my bills without depleting a large chunk of my personal savings that I had as both a cushion and as a downpayment on a house. We both still have large monthly health insurance bills, rent, and larger household bills from staying home (when you travel 90% of the time your utilities are much lower and all of your food is paid for).

While I can pay my bills now, and can pay for a while by depleting my cash savings, I don't know when my industry will be back to 100% (potentially a year, and certainly not 100% until there's a widely available vaccine). Is it morally and ethically wrong to take advantage of the PPP, including applying for forgiveness?
posted by Bunglegirl to Work & Money (17 answers total) 2 users marked this as a favorite
 
You know your business best and if you feel like it would be best to apply, then do it! I am assuming that if you apply there will be a time period for reviewing the program particulars and if at that time you feel like it’s not a good deal (I’ve heard so many opinions on that) then you can decline at that time. Hopefully we’ll all know more then about the landscape.
posted by amanda at 2:54 PM on April 11, 2020 [2 favorites]


I would absolutely file for a PPP loan and maximum forgiveness when the time comes. If you are in a position to help others later you can and should, but it doesn’t have to be an either/or, take advantage of what’s available now to take care of yourself and see where you land.
posted by zibra at 2:56 PM on April 11, 2020 [18 favorites]


Apply 100%. The cash you give will not just help you stay afloat, it will let you stay on track for retirement, give you more flexibility with future business projects, etc. The only circumstance under which I'd even consider not applying is if you were planning not to reopen.

Every corporation of significant size will be taking advantage of everything available. So in a real sense a lot of the money will be going to the more fortunate. I'm not saying "be like a big corporation" but this isn't some loophole; this is exactly what the aid is for.

You can donate large chunks of the money you get to charity if you are feeling guilty. I don't think that's required but that makes more sense than just not partaking.

(FWIW I've been on the side of "don't collect unemployment even though you're technically eligible" on occasion, so it's not like I blindly encourage middle class to dip into programs. This is a special and truly unprecedented situation.)
posted by mark k at 3:07 PM on April 11, 2020 [4 favorites]


Government programs are different from charity. You applying for this government program does not permit others who are less fortunate from also receiving assistance. There's not a limited pool of money available -- the government has already committed to funding those who qualify. As long as you're not misrepresenting anything, it's not wrong for you to apply -- especially given the uncertainty of the situation.
posted by mekily at 3:10 PM on April 11, 2020 [10 favorites]


You can donate large chunks of the money you get to charity if you are feeling guilty. I don't think that's required but that makes more sense than just not partaking.

My layperson understanding is that PPP is structured as a loan except for 1) an initial $10k grant and 2) eventual forgiveness of $$ you spend on payroll and mortgage and ongoing company expenses.
posted by BungaDunga at 3:14 PM on April 11, 2020 [2 favorites]


Definitely, definitely apply! If you have those savings, you will be in a better place to help others. If you don't use those funds, who's to say they'll go to someone who needs it more than you? If you receive the funds you can always donate to those in need.
posted by slidell at 3:16 PM on April 11, 2020 [1 favorite]


Yes to applying. Also, if a federal emergency has been declared in your state, you may be eligible for Disaster Unemployment Assistance. If that's the case, you'd apply through your state unemployment office -- do that, too (just be aware it might take a while to get through to them).
posted by ourobouros at 3:20 PM on April 11, 2020 [2 favorites]


If I thought the economic disruption here were very likely to be of a limited and predictable duration, I would encourage you to ride it out (the "oh, if you have extra money you can help others!" rationale is just too self-serving, and it is also not correct that there is no limit to the funds allocated to this program). As it is, I'm going to say frankly: you shouldn't have confidence that you "don't need" the money. The scope of the recession we're on the verge of having is really unpredictable. It may be a long, long time before your business recovers. However, I understand and respect your partner's position.
posted by praemunire at 3:31 PM on April 11, 2020 [2 favorites]


pdf link to treasury.gov fact sheet on the PPP

I would definitely check with your business bank first, like contact an actual person, because as you can see from that fact sheet there are quite a few conditions to the current PPP program - you may not actually be eligible for the loan or forgiveness (or it may not be practical), depending on how you have your business affairs structured.

There may well be other SBA or state level programs (like the Disaster Assistance mentioned above) that will fit your needs better.

They believe taking part in the program is "hypocritical" because we are liberal and believe in supporting those less fortunate and that "others need it more" than me

Sure, I can see their point, and to a large extent I would say it’s kind of between you and your conscience, but OTOH I could also make a case that you should apply anyway because (whether you get the loan or not) you’re adding to the sheer numbers of people/small businesses applying, just one more data point reinforcing the evidence that our small business & social safety nets are wholly inadequate, both now in this emergency and even in the normal run of things. IOW, while you and your partner may not be “less fortunate” in a personal sense, we don’t get to the point of structural change and better current relief without Congresspeople & agencies & think tanks having the numbers to prove that thousands or millions of people & companies need more support - which needs thousands and millions of people and companies to ask for it. You can be one of those.

Also, bluntly, years of conservative propaganda to the contrary, the government is us. Pretty much everything gets paid for with our tax dollars, I don’t really see a moral quandary in looking to get some of that back in an emergency.

as I am not W2 or an employee of any other business.

There has been a significant expansion of unemployment benefits to cover people just like you, I would apply for this with a clear conscience.
posted by soundguy99 at 4:03 PM on April 11, 2020 [7 favorites]


Don't get your hopes up. The PPP is only forgivable for 8 weeks of payroll expenses + 25% over that for rent and utilities. Anything on top of that you have to start paying back, with interest, in 6 months. For contract work like you do, I'm not sure how it calculates payroll; you may be up a creek.

Also, even though all providers are supposed to offer to all businesses, all the banks and lenders around here (NC) are playing favorites: mostly requiring that your business have multiple pre-existing accounts or they won't accept your application. According to a state legislator I heard from, that's illegal, but it's absolutely being done, and with the kind of oversight this program is seeing (hahahaha), there aren't likely to be any repercussions. So good luck if you do decide to apply. I hope you know somebody.
posted by rikschell at 5:00 PM on April 11, 2020 [5 favorites]


They believe taking part in the program is "hypocritical" because we are liberal and believe in supporting those less fortunate and that "others need it more" than me

The program is aimed at businesses up to 500 employees. That's not "small" by my definition and I don't know how or why "others less fortunate" factor into this. The government is offering loans to help cover the uncertainty of what's happening and the money is essentially invented out of thin air, not taken out of tax dollars like unemployment insurance.

I'm a sole propreitor as well the advice I've been given is to file for both PPP and UI and see what happens.
posted by bradbane at 5:02 PM on April 11, 2020


Response by poster: The PPP is only forgivable for 8 weeks of payroll expenses + 25% over that for rent and utilities.

My understanding is that for sole proprietorships (I have a DBA name) they divide net profit or something else on your schedule c and divined it by 12 to get monthly “payroll” expense. Thanks for those who suggested I confirm with the bank on these details. My business bank (Citi) invited me to apply so we will see what happens there as far as favoritism.

There has been a significant expansion of unemployment benefits to cover people just like you, I would apply for this with a clear conscience.

I often wonder how this would work with someone like me. If I’m contracted by the day am I “employed” as soon as I get my next “one day” or when I get a certain amount of work—those sorts of questions make me much less likely to apply for those sort of programs.
posted by Bunglegirl at 7:04 PM on April 11, 2020


I often wonder how this would work with someone like me. If I’m contracted by the day am I “employed” as soon as I get my next “one day” or when I get a certain amount of work

The CARES act (one of the recently passed stimulus bills) explicitly is set up to provide for this.

Quoting a Forbes article:

"Unemployment: The program provides $250 billion for an extended unemployment insurance program and expands eligibility and offers workers an additional $600 per week for four months, on top of what state programs pay. It also extends UI benefits through Dec. 31 for eligible workers. The deal applies to the self-employed, independent contractors and gig economy workers."

Exactly how you would make a claim for this depends on your state, check on the appropriate state government website.
posted by soundguy99 at 7:20 PM on April 11, 2020


My understanding is that for sole proprietorships (I have a DBA name) they divide net profit or something else on your schedule c and divined it by 12 to get monthly “payroll” expense. Thanks for those who suggested I confirm with the bank on these details. My business bank (Citi) invited me to apply so we will see what happens there as far as favoritism.

Good luck figuring out whatever the fuck the government wants. Not to be crude, but one of my biggest gripes about this is that it keeps changing and "payroll" is a weird requirement. My friend has (had) employees he laid off and has to put them back on the payroll within a certain time period, but doubts he has the capacity or need to hire them all back. That's assuming things reopen. He may be applying for yet another reimbursement program though.

Apply, I am in your exact situation. It doesn't hurt to apply so I did, but I was planning on either not using it or using it as a "business doesn't bounce back until early next year and I'll take the penalty for misusing this to keep myself fed" fund.
posted by geoff. at 9:24 PM on April 11, 2020


"I feel that it is in my business's best interest to apply so that I can continue to pay my bills without depleting a large chunk of my personal savings that I had as both a cushion and as a downpayment on a house."
This.
Better to have it and not need it than to need it and not have it. Put it in the bank, give the interest to charity, whatever. You pay taxes. This is your tax money at work.
posted by TrishaU at 9:24 AM on April 12, 2020 [2 favorites]


My friend has (had) employees he laid off and has to put them back on the payroll within a certain time period, but doubts he has the capacity or need to hire them all back.

That’s part of the point/purpose of these loans, isn’t it? To keep those unneeded employees on the payroll for at least 8 more weeks to reduce the harm (to them) of something beyond their, or your friend’s, control? Even if they’re doing little or nothing. It also helps flatten the curve ;) on a surge of people applying for unemployment for 8 weeks.

They believe taking part in the program is "hypocritical" because we are liberal and believe in supporting those less fortunate and that "others need it more" than me.

There’s a cap of $100,000 annual income (so about $17k over two months). One can argue if that’s the right number, but the effect should be to keep anyone from taking too much advantage.

If you don’t want to just give the money to charity, buy some business-related goods or services from another, less-fortunate small business with your savings as you pay yourself with the PPP loan.
posted by mistersix at 12:37 PM on April 12, 2020


My understanding is that for sole proprietorships (I have a DBA name) they divide net profit or something else on your schedule c and divined it by 12 to get monthly “payroll” expense.

That's all I had to do to apply. Schedule C / 12 then times 2.5x = loan amount. I have yet to hear anything back from my credit union though and I submitted a week ago.

That’s part of the point/purpose of these loans, isn’t it? To keep those unneeded employees on the payroll for at least 8 more weeks to reduce the harm (to them) of something beyond their, or your friend’s, control?

Well, in my state, we are past day 30 of shelter in place. How many small businesses have a month+ of payroll on hand on top of their overhead? Even the very, very few people who have had an application accepted have not actually received any funds yet as far as I've read. The Feds also keep over-promising it in the media and then changing the rules as they go in the background, which doesn't inspire confidence this is going to work out like they say.

So if you're a biz owner with a payroll, do you drain every last cent waiting on these PPP loans to materialize? Or do you furlough/lay off your employees so they can get the unemployment assistance faster? Hard decision that's being forced on people by them bungling the roll out of this.

For sole proprietors though I think it's fortunately a much easier decision: there is so much uncertainty right now, you should definitely at least submit an application.
posted by bradbane at 3:03 PM on April 12, 2020 [1 favorite]


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