How to Apply for 'Paycheck Protection Program' Loans If You're Self-Employed, an Independent Contractor, or a Gig Economy Worker

by Covid-19 Health Resource Center | 4.15.20

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Donald Trump on March 27, 2020, and one of its key provisions was the creation of forgivable loans for small businesses through the Paycheck Protection Program (PPP). Administered by the Small Business Administration (SBA), the Treasury Dept., and participating financial institutions, the program is also open to self-employed individuals, independent contractors, and people in the “gig economy.” Such workers are eligible to apply for PPP loans as of April 10, 2020.

How to Apply

• The first step in the process is filing a PPP application with a participating lender.
• The SBA created a search tool that allows you to enter your zip code and find a list of banks, credit unions, and other financial institutions that are eligible to participate in the PPP.
• Once you have a list of lenders, you’ll want to reach out to your preferred lender. 
• Some lenders are only making PPP loans to borrowers they have an existing or previous banking relationship with, so you may want to begin your search with a lender that falls into that category.
• However, an existing banking relationship isn’t required for a PPP loan to be approved, so you can contact other eligible lenders as needed until you find one accepting applications.
• Applications are made directly with the lender, and forms may vary, but the SBA has made a sample form available that can give you a sense of information you’ll want to have ready.
• PPP loans have a 100% federal guarantee, so there is no requirement for a borrower to personally guarantee the loan or to put up collateral.

How the Loan Forgiveness Works

• Amounts spent on payroll in the 8 weeks following the loan’s origination date can be forgiven. Eligible expenses include salary, wages, cash tips, insurance premiums, retirement contributions, and covered family & medical leave.
• Additionally, the Treasury Dept. has advised that up to 25% of the forgiveness amount can cover business-related overhead expenses that were in effect prior to February 15, 2020.
• PPP loan amounts that aren’t forgiven after one year are carried forward as a loan with a maturity of 2 years and an interest rate of 1%. PPP loan payments can be completely deferred for at least 6 months, but no later than 1 year.

RESOURCES

• Small Business Administration - Eligible Lender Search Tool
• Small Business Administration - Paycheck Protection Program
• Small Business Administration - Sample Application Form
• Treasury Dept. - Borrower Information Sheet
• U.S. Chamber of Commerce - Coronavirus Emergency Loan Guide & Checklist
• U.S. Chamber of Commerce - Small Business Guide to the CARES Act

Learn more about the small business side of the SBA’s Paycheck Protection Program here.

— Eric Revell

(Photo Credit: iStock.com / mphillips007)