Back in April, approximately five lifetimes ago, Wingspan reported that the Small Business Association (SBA) had made its Paycheck Protection Program (PPP) available to freelancers and independent contractors, in addition to small business owners. People negatively impacted by COVID-19 could apply for loans to cover payroll as well as rent, utilities, and mortgage payments, for up to eight weeks. These loans came with a very low interest rate of 1% and their payments would be deferred for six months. However, if recipients used their loans for employees’ wages and retained their employees through the pandemic, their loans could be forgiven. Here’s what you need to know about PPP loans and how to get yours forgiven.
If you’ve just recently realized that a PPP loan would be useful to your business, don’t stress: As of July 6, the PPP was granted an extension and, in turn, the SBA started accepting new applications once again. It will continue to process new applications until August 8. (Begin the application process here.)
For small business owners who have already applied for and received your PPP loan, you can seek forgiveness if you retained (or quickly rehired) your employees and put at least 60% of your loan toward their payroll (the remaining 40% could go to the business expenses we mentioned above). As a freelancer, self-employed person, or independent contractor, you’re eligible for PPP loan forgiveness if the majority of your loan replaced the income you lost due to the pandemic while the rest (roughly 25%) went toward rent, utility, or mortgage costs for your business. Personal expenses, including health insurance, retirement savings, and mortgage payments on your home (even if you have a home office), cannot be forgiven under the PPP.
Even if you checked all the eligibility boxes for PPP loan forgiveness, you still have to apply for forgiveness separately. The good news: It’s not as painful as it sounds. The American Institute of CPAs (AICPA) recently launched an online tool to expedite the process, from calculating and double-checking your eligibility to filling out the application to making sure you have all the other necessary forms to submit your final request. You can also apply for forgiveness through the SBA’s site. Wingspan helps members make sure they get paid on time with its simple, streamlined invoicing service. Sign up for a free 30-day trial here.You Might Also Like:How to Apply for Government Support Through the SBA’s Economic Injury Disaster Loan ProgramHow to Manage Small Business BookkeepingHow to Get Organized for Next Year’s Tax Season Now