Can You Use The Paycheck Protection Program (PPP) To Pay Yourself? Financial Advisor Don Dirren Explains
Don Dirren Is Helping Small Business Owners Understand the PPP – And What It Means For Their Bank Accounts
Many small business owners have been hit hard by changes in income during the COVID-19 crisis. From struggling to pay employees to having trouble making payments in order to keep rented storefronts open, the changes in the economy have been hard for many businesses to handle.
Luckily, there’s help available. According to Don Dirren, the SBA, or small business administration, is offering several options to businesses that have been struggling financially since the onset of the pandemic.
The PPP, or paycheck protection program, works to help employers continue to pay their employees, without having to take money from other areas of the business. This type of loan can be invaluable, allowing businesses to stay open when they’d have to shut down otherwise, according to Don Dirren.
Some business owners find that even though they’re able to pay their employees with the help of the PPP, they’re struggling to manage their own expenses. Don Dirren is working to help small business owners understand whether they can utilize the PPP to help them cover personal expenses (in addition to business expenses) in the wake of the COVID crisis.
Many small business owners don’t regularly pay themselves int he same way that they pay their employees. Rather, they use a process called an “owner draw” to transfer money from their business to their personal account. For many business owners, this is not a scheduled process, according to Don Dirren.
Unfortunately, owner draws are not covered by the paycheck protection program, according to Don Dirren. If you’re the sole proprietor of your business, your salary will be determined by the net profit of your business, and you may be able to get relief through the PPP.
Don Dirren says that when you apply for the payroll protection plan as a sole proprietor, you’ll be asked to estimate your monthly payroll expense. For this, you’ll take the net profit of your business for 2019 and divide by 12.
Don Dirren recommends applying for the PPP as soon as more funds become available. Many lawmakers are currently pushing for more PPP funds to open up. The application process is easy, but a limited amount of funds are available, according to Don Dirren. The sooner you apply, the more likely it will be that you’ll get the funds you need to stay afloat in both your business and personal expenses with help from the PPP.