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Real estate brokers: Figuring out your PPP and EIDL eligibility and how to calculate your loan amount

May 11, 2020

Real-estate brokers, are you looking for clarity around what help you’re eligible for during the COVID-19 crisis?

If you’re an independent contractor, you may be under the impression that the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program don’t apply to you. But you can qualify for those programs, even if you have no employees.

The PPP is particularly attractive because it provides loan forgiveness if you spend the funds on payroll costs and other allowable uses within the first eight weeks of receiving them.

Read more: PPP eligibility and how small businesses can use the funds

How to calculate your PPP loan amount

Calculating how much you’re entitled to as an independent contractor has a formula to it. Here’s the simplified three-step process:

  1. Go to your Schedule C (Form 1040) and find your net profit on line 31.
  2. Because the cap limit is $100,000, if your net profit is over that, you have to reduce it to $100,000.
  3. Calculate your average monthly payroll cost and multiply that number by 2.5. The result is the amount of PPP loan funding that you’re eligible for.

Here’s an example of the PPP loan calculation in action. Let’s say you have a regular, ongoing sole proprietorship with no employees, and your business has been in operation for at least a full year. Your net profit for 2019 was $230,000. Your calculation would look like this:

PPP loan calculation chart

Please note, if your Schedule C business took a loss prior to the COVID-19 pandemic and you had no employees, you will not be considered to have a salary for this calculation. Therefore, it will be more difficult for you to represent that the pandemic itself has had an adverse impact on your business. In this case, we would recommend looking into the EIDL program instead.

PPP and EIDL restrictions

Prior to May 4, the SBA had closed EIDL applications in order to work through the previous application backlog. On May 4, the SBA opened EIDL applications to agribusinesses, which suggests that afterwards they will likely reopen applications to everyone else who is eligible. Applying for the EIDL does not restrict your ability to also apply for the PPP if you are eligible for both.

However, if you get the $10,000 advance from the EIDL, you cannot use it for payroll costs and must instead use it for other business expense obligations.

The PPP also comes with usage restrictions. The SBA requires that at least 75% of the PPP loan be spent on payroll, while the remaining 25% can be spent on expenses such as utilities, rent, mortgage interest and other debt obligations.

To further ensure PPP loan forgiveness, it’s important to keep detailed records so you can track where the funds went. We recommend putting the PPP loan funds into a separate bank account to make it easier to track them.

Read more: PPP loans: Proper documentation and accounting

The economic uncertainty or good-faith certification

Lastly, and very importantly, the SBA instructs that before applying for a PPP loan, borrowers should consider whether their potential access to other sources of liquidity ultimately makes a PPP loan unnecessary to support their ongoing operations. Borrowers must make a good-faith certification that the PPP loan is necessary and should document those needs with the filing of the application.

Read more: SBA PPP loan economic uncertainty certification

Need help with your application?

To identify which program(s) you’re eligible for, work with your lawyer and an accountant like Wipfli. We can help you determine which program would be the right fit for your business, as well as determine the appropriate loan amount.

In our next piece, we also cover two big tax options real estate brokers can use to provide further relief. Click here to read now.

We’re also here to help you navigate the uncertainty of the COVID-19 pandemic and its impact on your finances and business. We have developed a library of resources in our COVID-19 resource center to help you stabilize today and prepare for tomorrow.

See our articles on:

Construction and real estate
Business finance
Legislation and regulation
Personal finance


Dannielle Lewis, CPA
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