Ppp Loan Contractors

As the COVID-19 pandemic swept the globe, businesses were left struggling to survive. The government responded by passing the Paycheck Protection Program (PPP) in March of 2020, which offered loans to help businesses keep their doors open and their employees paid. However, these loans were only available to businesses that met certain criteria, and many contractors found themselves excluded from the program.

Fortunately, the situation has changed. On December 21, 2020, the Consolidated Appropriations Act was signed into law, providing new opportunities for PPP loan contractors.

What is a PPP Loan?

Before we dive into the details of how contractors can benefit from PPP loans, let`s take a step back and review what these loans are. The PPP was designed to help small businesses keep their employees on payroll during the COVID-19 pandemic. The loans are forgivable if certain conditions are met, such as using the funds for eligible expenses like payroll, rent, and utilities.

Initially, the loans were only available to businesses with employees. However, in April 2020, the Small Business Administration (SBA) clarified that self-employed individuals and independent contractors could also apply for PPP loans.

Who is Eligible for PPP Loans?

Under the Consolidated Appropriations Act, independent contractors and self-employed individuals are eligible for a PPP loan if they meet certain criteria:

1. The applicant must have been in operation on February 15, 2020.

2. The applicant must have earned at least $5,000 in gross income from their business in 2019.

3. The applicant must submit documentation demonstrating that they were in operation on February 15, 2020, and that they had gross income in 2019.

How Much Can Independent Contractors and Self-Employed Individuals Borrow?

The amount of money that independent contractors and self-employed individuals can borrow through the PPP is based on their average monthly net profit for the 2019 tax year. The loan amount is calculated by dividing the average monthly net profit by 12 and then multiplying that number by 2.5.

For example, if an independent contractor had an average monthly net profit of $4,000 in 2019, they would be able to borrow $10,000 ($4,000 divided by 12, multiplied by 2.5).

How Can Independent Contractors and Self-Employed Individuals Use PPP Funds?

PPP funds can be used for a variety of eligible expenses, including:

1. Payroll costs, including salary, wages, and tips.

2. Benefits, including health insurance and retirement contributions.

3. Rent.

4. Utilities.

5. Interest on mortgages.

The Consolidated Appropriations Act also expanded the list of eligible expenses to include:

1. Covered operations expenditures, such as software or cloud computing services that facilitate business operations.

2. Covered property damage costs, such as costs related to property damage due to public disturbances that occurred in 2020.

3. Covered supplier costs, such as payments made to suppliers that are essential to the recipient`s operations.

4. Covered worker protection expenditures, such as personal protective equipment and other expenses related to ensuring employee safety during the COVID-19 pandemic.

Final Thoughts

The PPP has provided a lifeline to many businesses struggling to stay afloat during the COVID-19 pandemic. With the expanded eligibility criteria under the Consolidated Appropriations Act, independent contractors and self-employed individuals can now benefit from these loans as well. If you`re a contractor, make sure to review the eligibility criteria and use of funds guidelines to see if a PPP loan is right for you.

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