PPP: What Independent Contractors Need to Know

by Megan Hiles
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The COVID-19 pandemic continues to present new challenges for small businesses and relief programs continue to pose new questions. What am I eligible for? When should I apply? When can I expect funds? If you are an independent contractor, or a gig worker, here’s what you need to know.

The Paycheck Protection Program (PPP) provides $349 billion in forgivable loans to help small businesses stay afloat during the COVID-19 crisis. You are eligible for a PPP loan if you are an individual who operates as an independent contractor or eligible self-employed individual if you were in operation on February 15, 2020. The maximum loan granted from the PPP will be equal to 2.5 times the average monthly payroll costs for the previous calendar year, up to $10 million. Loans granted under the PPP will be forgiven in full if certain requirements are met. Companies must keep workers on their payrolls for an eight-week period after the loan is granted, and the businesses can only use the loan for specific other costs.

Some banks began accepting application on Friday, April 3 and independent contractors and self-employed individuals are eligible to apply beginning this Friday, April 10. We are encouraging all of our clients to apply as soon as possible due to funding caps and the time needed to process loans. We continue to get further guidance and navigate this situation, but here’s what we know so far.

What we’ve learned about PPP and our recommendations

  • Each bank has their own process and requirements.
  • Interpretations still vary and more guidance to come from the SBA.
  • Since the PPP opened for applications Friday, banks have already found themselves overwhelmed by businesses seeking funding, and some have even stopped accepting applications.
  • You cannot receive both Unemployment Benefits and a PPP loan at the same time, so it’s best that you calculate the anticipated payout of each program to determine which is most beneficial for you.
  • Independent contractors are eligible to apply and will use net profit to determine salary. This would be reported on line 31 of your schedule C if you’ve already filed your 2019 tax return.

How you can prepare

If you haven’t already, be sure to reach out to your lender as soon as possible to understand what they are looking for. Lenders will want to see proof of income so you’ll need to collect any earnings reports, pay stubs, or invoices you have. You must also submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship.  For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

You can calculate your anticipated loan amount by using our Corrigan Krause Paycheck Protection Program – SE and Indep Contractors Loan Calculation Template.

Looking for an SBA lender? A full list of SBA lenders can be found here.

Lastly, have patience. Banks have been overwhelmed and you can expect lengthy response times. Prepare the best you can, gather all necessary documents, and do you best to understand what the process will be like. And of course, reach out to us with any questions! Our Corrigan Krause Coronavirus Crisis Team is here to assist you. Please send your questions and requests to: ckcrisisteam@corrigankrause.com.