COVID-19 and SBA Options For Self Employed Individuals

An SBA program for small businesses & the self-employed

Self-employed individuals can start applying for this on Friday, April 10th, and there is a finite allocation of funds, so people that don’t respond in a timely fashion may find that it is too late to receive assistance at a later time.  The PPP loan is likely helpful for many of you as the loan is forgivable, e.g. free money, if you meet the qualifications, and even if you don’t the interest rate and terms are very favorable.

The Paycheck Protect Program (PPP)

This allows businesses to borrow the lessor of 2.5 times your average monthly “payroll costs” or $10 million.  Payroll costs is a little bit of a misnomer, because when you look at the actual definition payroll costs include self-employment income, e.g. net income reported on your Schedule C.  Some of you might also question whether you have a “business” or not, but the program applies to anyone with self-employment income. 

There is a $100,000 “compensation” limitation, but that just means that you will be capped at a little over $20K, with the possibility of also adding in health care and retirement benefits on top of that figure.   

How to Qualify

You have to calculate your eligible loan based on 2.5 times the average of the last twelve months, or the 2019 calendar year, “payroll costs”, certify that the “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant”, and find an SBA approved lender to process your application.  

For some, finding an SBA approved lender to work with might difficult, but I would start with your regular bank and look at other options if they cannot assist you.  Kabbage (www.kabbage.com) also appears to have a platform to apply.  You should exercise caution as they are not a SBA approved lender, but it appears they are working with banks that are approved lenders. 

Additional details of the PPP

  • These are non-recourse, no personal guarantee, and no collateral loans.
  • The funds must be used to pay “payroll costs”, rent, utilities, and interest on existing debt during the eight weeks after you get the funds.
  • There are no payments for six months.
  • The loans are forgivable in part or in whole on a tax free basis, if you use 75% of the proceeds on “payroll costs” and 25% on other eligible costs within eight weeks of receiving the funds.  You also have to maintain year over year “employees”, but if you are the only one working in your business it appears this is an easy threshold to meet.
  • The loans amortize over 2 years at 1.0% interest if they are not forgiven

The rules are changing daily

Please note that the details could change as you apply for this program, but this is in the information we have at this point.  Below you can find the loan application, US Chamber information, a fact sheet, and helpful frequently asked questions about the PPP.

Paycheck Protection Program Frequently Asked Questions

PPP Borrower Application Form

PPP Borrower Information Fact Sheet

US Chamber Overview