A Paycheck Protection Program (PPP) loan can help small businesses cover payroll and other expenses during the coronavirus pandemic. To be eligible, your business needs to have been operating for at least 15 days as of February 15, 2020. You can apply even if you don’t have a registered business or LLC status. Sole proprietors, independent contractors, and freelancers can get PPP loans.
In December 2020, Congress passed the "Economic Aid to Hard Hit Small Businesses, Nonprofits, and Venues Act." This expanded eligibility for PPP loans, increased forgivable expenses, and streamlined the application process.
Properly maintained financial records are essential when applying for a PPP loan. Sole proprietors should consider accounting and bookkeeping services to keep track of finances.
Benefits and Drawbacks
The key benefits of PPP loans are that they can cover 2.5 times your typical monthly payroll costs, up to $10 million, and loans used for payroll, mortgage interest, rent, and utilities can be forgiven up to 100%. However, you can’t deduct these forgiven expenses from your taxes. Another drawback is that if you have business affiliates who own 50% or more of your business, their employees have to be included in your headcount.
Alternatives to PPP Loans
If you can’t get a PPP loan or after PPP funding runs out, look into SBA Economic Injury Disaster Loans. Also consider equipment financing, personal loans, and support from personal savings or family and friends.
Do startups qualify for PPP loans?
To be eligible, your business needs to have been operating for at least 15 days as of February 15, 2020. Sole proprietors, independent contractors, and freelancers can get PPP loans.
What types of businesses are not eligible for PPP?
To be eligible, your business needs to have been operating for at least 15 days. Sole proprietors, independent contractors, and freelancers can get PPP loans.
Note: The last section may not be explicitly titled in the original text, but I added it to maintain clarity, as it follows a question that suggests discussing the businesses not eligible for PPP. If this does not align with the intention, the title can be omitted or revised.