PPP Loan Forgiveness for Freelancers and Contractors

August 12, 2021

The Paycheck Protection Program, or PPP, was designed to help American entrepreneurs stay afloat during the recent pandemic. The program was geared at small businesses that were struggling to make ends meet as many parts of the country went into shut down.

Most people associate the PPP with mom and pop stores – barbershops, delis, and independent restaurants have all benefited from the program. But the PPP also has a provision to help self-employed workers and sole proprietors. Now, many people who qualified for PPP loans can apply for loan forgiveness. If successful, that could mean that the whole debt is wiped out. Whether you need PPP loan forgiveness for self-employed, independent contractors, or small businesses, consider looking at the options available.

Want to learn more? Keep reading for everything you need to know about getting PPP loan forgiveness as a self-employed individual or a sole proprietor.‌

How Does Loan Forgiveness Work?

If you apply for loan forgiveness, the government will want to know how, exactly, you used the funds from your loan.‌

If you used the money for payroll expenses, or to pay other specific business expenses like rent, mortgage payments, or utilities, then you may qualify for loan forgiveness. Please note that the rules about what PPP loans may be used for are very strict. 

If you used your PPP funds to pay contractors, you won’t be able to get forgiveness. The loans are meant to be used for payroll expenses like paying employees’ salaries and tips, paying your own salary, and covering legal holidays and sick days. 60% of your PPP loan must be spent on payroll expenses, in order to qualify for forgiveness.

In order to qualify for forgiveness, you must maintain the same number of employees on your payroll. That’s because the purpose of the PPP loan program is to keep paychecks flowing to Americans. If you laid off employees during the term of your loan, you will likely not be eligible for full forgiveness. However, you may still be able to get part of your loan forgiven. It is a good idea to check the terms of the PPP loan for independent contractors carefully.

What If I Don’t Have Employees?

Many self-employed individuals and sole proprietors don’t have any employees on their payroll. If that’s your situation, don’t worry – you can still qualify for loan forgiveness. After all, you qualify as an employee on your own payroll. As long as you spent at least 60% of your loan on your own salary, you can apply to have your loan forgiven.

How Do I Apply for PPP Loan Forgiveness as a Freelancer or Contractor?‌

As a self-employed individual, you can probably apply through a simple application process using the Small Business Administration portal. If your PPP for independent contractors loan amount was $150,000 or less, then you can also apply for forgiveness using this simplified application form.

In addition the SBA is providing a new SBA Direct Borrower Forgiveness Portal. This new portal launched on Wednesday August 4th here.

In some cases, you may need to apply for loan forgiveness through your lender, instead of through the Small Business Administration. The SBA has released a list of all of the lenders participating in the direct forgiveness program. If your lender is not on the list, you must apply directly to the lender.

What Do I Need to Know Before I Apply?‌

Before applying, gather together all of your payroll documents, as well as any documentation related to your other business expenses. Be prepared with the exact amount that you spent on payroll and other eligible expenses. Keep a copy of the loan forgiveness application for your files.‌

Gain Confidence and Know Where You Stand Financially

It’s not easy to succeed as a self-employed individual in today’s complex economy. Lunafi can work with you to make taxes and cash flow management run smoothly. Visit us today to learn how Lunafi’s automated financial services can save you money and leave you free to focus on growing your business.

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