As a sole proprietor, independent contractor, or self-employed individual, you may be eligible to receive assistance under the Small Business Administration’s Paycheck Protection Program (PPP).
Below are key details released by the SBA on April 2, 2020:
What is the Paycheck Protection Program (PPP)?
It is an SBA loan program that helps businesses keep their workforce employed during the COVID-19 crisis. The funds can be used for payroll, rent, mortgage interest or utilities. Small businesses, sole proprietors and independent contractors are eligible for assistance.
When can I apply?
- Starting Friday, April 3, 2020, small businesses and sole proprietorships can apply.
- Starting Friday, April 10, 2020, independent contractors and self-employed individuals can apply.
When is the application deadline?
The program is open until June 30, 2020. However, there is a funding cap so you should apply as soon as possible. The good news is that the government is planning to provide additional funding to the program.
How large can the loan be?
Loans can be for up to 2.5 times your average monthly payroll costs (or earnings as an independent contractor). On an individual employee basis, the payroll costs are capped at $100,000. For example, if you have 2 employees making $40,000 and $50,000; plus yourself making $120,000. The calculation will be made as follow:
- 12-month annual income: $40,000 + $50,000 + $100,000 = $190,000 (your pay is reduced to $100,000 for the purpose of this calculation)
- Monthly payroll costs: $15,833
- Estimated loan amount: $15,833 x 2.5 = $39,583
What qualifies as “payroll costs”?
- For independent contractors/sole proprietors: Wages, commissions, income or net earnings from self-employment or similar.
- For small businesses: Compensation to employees, e.g., salary, wages, commissions or similar.
Where can I apply?
To find a lender that is eligible to issue a loan under the PPP, go here: https://www.sba.gov/paycheckprotection/find
Where can I find more information about this program?
For more information, visit the Small Business Administration’s Paycheck Protection Program (PPP) web page.
Pinyo Bhulipongsanon is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.
I am a consultant that receives a 1099 from my employer. My employer receives funds from a third party via a contract. I have a contract with my employer through June 30, 2020. Do I need apply for the PPP program?