Over the past year, the SBA has rolled out a series of updates and adjustments to better serve the self-employed who need/want a Paycheck Protection Program (PPP) loan. Here’s everything you need to know:
You can apply for PPP via any lender participating in PPP whether or not they are your primary bank. Online applications make it easy and accessible, in addition to limiting exposure with an in-person application. To apply for a PPP loan online, you’ll need to calculate your payroll costs and gather the required documentation to complete the application successfully.
For full instructions for how to apply online, consult our Step-by-Step Guide to Applying for a PPP loan .
To qualify for a PPP loan, self-employed individuals must meet the following criteria:
You can qualify for 2.5 times your monthly payroll costs— based on either your net profit or gross income during the calculation period.
In March 2021, the SBA released new guidance allowing the self-employed to choose whether they want to calculate their PPP loans based on net profit or gross income. Previously, calculations were limited to net profit, which limited the funds you could access if you’re in the habit of maximizing tax deductions.
If you have additional employees on your payroll, their payroll can be used to calculate payroll numbers. You cannot include 1099 workers in your payroll calculations, as they are entitled to apply for their own PPP loans.
There are 2 different methods for calculating your PPP loan depending on whether you employ other people.
Whether or not you have employees, you must take an additional step of adding the outstanding amount of any Economic Injury Disaster Loan (EIDL) awarded between January 31, 2020, and April 3, 2020, which must be refinanced into your PPP loan, although if you only received an EIDL advance, you will not need to refinance the advance amount into your PPP loan.
To complete your PPP application , you will need the following documentation. We recommend gathering this information prior to starting the application.
Yes, you can use your PPP loan for payroll-related expenses, including paying yourself. To qualify for loan forgiveness, individual payroll amounts cannot exceed the calculation limits, meaning you can pay yourself a maximum of $8,333/month ($100,000/year) to be eligible for forgiveness.
The allowed uses for PPP loans have been expanded. Due to high demands for the loan, it’s expected that you will still need to spend 60% of loan funds on payroll-related expenses, but you can now use the other 40% on a variety of uses.
Self-employed individuals can apply for a Second Draw on their PPP loan if you’ve experienced a revenue reduction of 25%+ due to the pandemic and you meet the other Second Draw qualifications. Learn more about how to qualify and apply for a PPP Second Draw.
The maximum amount for a PPP loan is 2.5 times your average monthly payroll costs. Income listed on a Schedule C in your personal tax return is the only payroll that can be used to calculate your PPP loan amount . If you’ve hired 1099 workers, they cannot be included in your PPP loan calculation and may apply for their own PPP loans.
No, you may apply for a PPP loan that is smaller than the maximum you qualify for (2.5 times your monthly payroll costs).
The SBA has simplified loan forgiveness applications for PPP loans less than $50,000. This provision was specifically designed to support independent contractors and the self-employed. Loans that meet this threshold will not have to meet the employee retention requirements of larger loans,
If your First Draw loan is $50,000 or less, you can not apply for forgiveness using the simplified Form 3508S .
The SBA has not yet indicated whether or not this guidance will apply to PPP Second Draw loans.
If your loan forgiveness application is denied, you will be required to repay the loan. PPP comes with a 1% interest rate and a maximum loan term of 5 years.
No, you must apply for loan forgiveness through your lender.
