How Can Freelancers Apply to the Paycheck Protection Program?

By Lili • Jan 12, 2021

As you probably heard, sole proprietorships, self-employed workers and independent contractors are eligible to receive a loan under the Paycheck Protection Program during this time of crisis. Are you confused about what that means? Don’t worry, you’re not alone. So we’re breaking it down for you.

I’m a freelancer and I can apply for a business loan?!

Yes. The only catch is that your operation had to be active before February 15th 2020.

If you’re running a sole proprietorship, you can start applying now. If you’re an independent contractor, you can start applying on Friday, April 10th. 

What is the loan for?

The loan is meant (and therefore calculated) to cover 8 weeks of overhead (utilities, mortgage interest/rent, and payroll) for businesses and independent workers who have lost income due to the Coronavirus crisis.

But I’m a freelancer and I don’t have payroll – how does that work?

Great question. Even if you don’t pay yourself a salary, you’re still earning a living wage from your work and reporting a yearly income on your taxes. That’s what is going to be taken into consideration here. Since your monthly income likely varies, you’re going to calculate your monthly average from your 2019 tax filing. Take your net income (Line 31 on your Schedule C) and divide it by 12. Note that for this program, the yearly net income is capped at $100,000 per person. 

What proof will I need to provide?

You will need to provide all your Tax Schedules from 2019 (filed or to be filed) showing your income and expenses from your freelancing business. Independent contractors will also need to submit their Form-1099 Misc. 

What does “loan forgiveness” mean?

This loan, if properly used under the terms given by the program, will be forgiven, meaning you will not have to pay it back – it will effectively turn into a grant. But only the amount used to pay the following expenses qualify to be forgiven: 

  • “Wages, commissions, income or net earnings from self-employment”
  • “Interest on mortgage”
  • “Rents under lease agreements”
  • “Utilities”

Note that 60% of the total loan MUST be used for the wages part and the money needs to be spent in the 8 weeks after the loan is granted. This is an emergency loan meant to cover your overhead, not invest in your business.

If I’m going to use the money for something else, what is the interest rate on the loan?

1% fixed.

What is the timeline?

Sole proprietors can start applying right now. Independent contractors and self-employed workers can start applying on April 10th. The applications right now are open until June 30th. 

The loan must be paid back within 2 years. You do not need to start making payments for 6 months, but interest will start accruing immediately.

How do I request loan forgiveness?

After 8 weeks, you will need to submit a request to the lender, with proper documentation of how the money was used. So make sure to keep good track of your expenses and how you’re using the loan. (Lili’s built-in expense management tool is here to help you do just that!)

Where do I apply?

The loans will be manned by Small Business Administration-backed lenders. Right now that’s about 1,800 banks across the country. (Note: Lili is not a credit lender, so we’re not one of them.) A good place to start is to contact your usual credit lender or a traditional bank. You can also fill out the application form on the SBA website. 

What else do I need to know?

Upon your application, you will need to certify on your honor that:

  • Current economic uncertainty makes the loan necessary to support your ongoing operations. 
  • The funds will be used to retain workers and maintain payroll or to make the mortgage, lease, and utility payments. 
  • You have not and will not receive another loan under this program. 
  • You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan. 

Note: these are exact quotes from an official document, and is worded to apply to all kinds of businesses, your income as a freelancer counts as “payroll.” 

Can I apply for unemployment benefits AND the Paycheck Protection Program?

No. You should select the one that is most beneficial for you.

I’ve heard of another loan program called EIDL (Economic Injury Disaster Loan) – is it the same thing as the Paycheck Protection Program?

No. These are two different programs. The EIDL is a type of loan that existed pre-COVID-19 to help businesses in times of disasters. The SBA created a special version of this loan in light of the COVID-19 pandemic that could grant an advance of $10,000 on an EIDL grant. Under that program, the money is to be made available within 3 business days of the application. With the information available today, it appears that this advance can be rolled into the Paycheck Protection Program if you end up being granted one. For more information on the EIDL, check the SBA’s website.

This blog is for informational purposes only and should not be considered legal advice. Also keep in mind that things are moving and changing constantly, and we will try our very best to keep it updated with the latest information.


Written by
Team Lili

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