The last stimulus package passed by Congress allocated $284B for additional Paycheck Protection Program (PPP) loans. Freelancers, independent contractors and members of LLC’s (if they pay self-employment taxes) are all eligible.
PPP loans are administered by banks and local community lenders on behalf of the Small Business Administration (SBA). Do a quick google search for “PPP lenders near me” if you need assistance finding one. Community Financial Development Institutions (CFDI) will actually get priority for the first few days, to make sure the loans are available to communities typically locked out of the financial system.
If you didn’t receive a PPP loan in 2020, you can apply now.
If you did receive a PPP loan last year, you are also able to apply for a second draw, but there are a couple of additional eligibility requirements.
If this is your first time, check our blog on how to apply for a PPP loan that we published in April of last year. The process and terms are pretty much the same with 3 major differences:
- You can now use either your 2019 OR 2020 payroll numbers to justify the amount you’re asking for. If your 2019 income was higher, it probably will be more beneficial for you to use that.
- The list of eligible expenses that qualify for loan forgiveness has been expanded. Last year only payroll, rent, utilities and mortgage interest were eligible (with a minimum of 75% on payroll). For this new round, you can also include cloud computing, software, accounting or HR expenses, property damage costs due to public disturbances that occurred during 2020 that are not covered by insurance and Personal Protective Equipment or other expenses you made to meet health and safety requirements for your business.
- If your business is in the Accommodations or Food Service Industry (NCAIS code starting with 72), you’re able to apply for a total of 3.5 times your monthly salary, compared to 2.5 times for any other sector.
If you already received a PPP loan, you are allowed to ask for a second draw, as long as:
- You’ve spent the entirety of your first loan.
- You can prove that you’ve experienced a loss of at least 25% of business income in at least one quarter of 2020 compared to the same quarter in 2019. For example: If you made $20,000 during Q3 of 2019, you need to show that you made no more than $15,000 during Q3 of 2020.
- You can apply for a second loan even if you haven’t requested forgiveness on the first one yet.
The forgiven amount of your PPP loan will not be considered taxable income at the Federal level, but make sure to check with your state and local tax authority for the latest information. There is no clarity on state and local tax treatment for PPP funds yet.
If you want to apply, your next step is to contact your local lender and discuss your options with them. Applications opened on January 11th for first loans, and will open on Wednesday January 13th for the second loans at Community Development Financial Institutions, soon followed by major banks.
This blog is for informational purposes only and should not be considered legal advice. Always check with the SBA or your personal lender for the most up to date information on your loans.