This government loan program has dried up. These people lost.


Chris Myers, a Baltimore-based photographer, applied for a PPP loan

Chris Myers | Chris Myers Photography

Chris Myers applied for a forgivable loan from the federal government. He runs his business as if the extra lifeline might not be on the way.

“I’m just tinkering with enough work to try to cover my studio rent and a bit of incidentals,” the Baltimore-based photographer said. Hospitals and colleges are his regular clients, and he’s grown by taking on more freelance photojournalism work with local magazines.

“I hope I don’t beat my bank account too much – 90% to 95% of business is sold out right now, so I’m just keeping the lights on,” Myers said.

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Myers is among millions of entrepreneurs who have applied for a slice of the $349 billion Paycheck Protection Program, or PPP. It’s been five days since he applied and he still doesn’t know if he will receive funding.

The first-come, first-served repayable loan program dried up on Thursday, April 16, with many small business owners still unsure of where they stand.

Some 1.6 million loans were granted on Thursday, according to the Treasury. Three out of four loans were $150,000 or less.

“People are waiting for money,” said Michael Maksymiw, partner at Marcum in West Hartford, Connecticut. “They’re trying to get that money and pay the employees so they can get groceries and operate.”

The self-employed and independent contractors like Myers were at a disadvantage from the start, the accountants said. For starters, they were only able to apply for the program from April 10 – a full week after it opened to small businesses.

“It was first-come, first-served and you had all these companies in the queue with no banks set up to accept applications,” said Eric Hjerpe, CPA at Hjerpe & Tennison in Bloomington, Illinois.

“Independent contractors got screwed on the back end; they automatically go to the end of the line,” he said.

Here’s where things went wrong for independent contractors and how they should proceed.

A late departure

Temporary closed signage is seen at a store in the Manhattan neighborhood following the coronavirus disease (COVID-19) outbreak, in New York, March 15, 2020.

Jeena Moon | Reuters

Myers applied for the loan through online lender Kabbage on Monday, April 13, submitting his 2019 tax return.

The Treasury has not released guidance on what independent contractors would need to apply for funding until April 14.

These applicants are expected to submit Schedule C of their 2019 tax return and supporting Forms 1099-MISC showing the compensation they received, along with bank statements.

The new guidelines, along with ongoing changes to loan amount calculations, have left entrepreneurs and their accountants scrambling to put together the paperwork.

“We have a lot of self-employed people who have been left behind,” said Dan Herron, CPA and principal at Elemental Wealth Advisors in San Luis Obispo, Calif. “We got the tips three days ago and the money has dried up.”

Early birds who submitted documents too soon run the risk of having their applications returned with requests for additional data, Hjerpe said.

Also, funding and approval depends on each bank.

“Some clients were funded the same day of approval and others were funded four days later,” Maksymiw said.

Accountants report that some banks – especially community and local lenders – were more receptive to applicants, compared to those that approached large national banks.

Reopening the window

Ultimately, it’s up to Congress to pump money back into the program.

Here’s what to do in the meantime to be ready if there’s a second round of funding.

  • Gather your documents. The documents you will want to prepare include your tax returns for 2019, including Schedule C, 1099-MISC forms that detail compensation received and a record that establishes that you are self-employed and in business on or about February 15, 2020.
  • Contact your accountant or payroll provider for employee documents. This would include Forms 941 and 940, which show Social Security and Medicare taxes withheld and payments for unemployment, respectively.
  • Don’t go alone. Bankers are in a rush and a neat set of documents prepared by your accountant can help smooth the application process.
  • Get to know your community bank representative. “The local relationship with your local banker really shines,” Herron said. “In a large national bank, you are just a number.”

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