Starting January 11, 2021, PPP – Paycheck Protection Program – loans were once again open. While you can begin your application online, learning more about a PPP loan for self-employed workers is also important.
The PPP makes it possible for lenders to provide low-interest loans that are 100% forgiven in some situations. Self-employed individuals and independent contractors that have faced negative consequences because of the COVID-19 pandemic have been eligible to apply for these loans since April 10, 2020.
The requirements are pretty straightforward, and getting the funds is something that can help businesses bounce-back faster.
Important Information About PPP Loans
When you are considering a PPP loan, it is important to know some information to ensure this is the right option for you and your business. Keep reading for some important facts that can help you make this decision.
- Maximum Loan Size
The maximum loan size you can receive is about 2.5 times your average monthly income. This average is taken from your past 12 months of income. You can get the information by creating paystubs online, providing documentation to apply for the loan.
- Forgivable Items
The amounts that you spend on business-related needs during the initial eight weeks of your loan term are considered 100% forgivable if the funds are used for:
- Replacing your 1099-MISC income
- Replacing your net self-employment income
- Interest for business mortgages
- Rent on your business
- Utility payments for your business
These are the only payments that are considered completely forgivable.
- You Must Apply for Loan Forgiveness
To take advantage of the loan forgiveness mentioned above, it is necessary to apply for it. This has to be done with a separate form after you have received funding.
- Interest Rate and Terms
For a PPP loan, the interest rate is fixed at one percent. The term for the loan is two years.
- Collateral Requirements
For traditional loans, you must have some type of collateral. Another option is to provide a personal guarantee. However, this is not required for a PPP loan.
What Is Needed to Apply for a PPP?
After you know what PPP lender you will apply with, you must complete the loan application and submit it to your chosen lender. You can submit a loan through the SBA website if desired, and there is help available through this platform.
Since you must submit certain documentation with your loan application, it may be helpful to have someone help you with the process.
Applying for a PPP Loan for Self-Employed Workers
If you need a PPP loan for self-employed workers, it is important to know the terms and facts about this loan. When you have the needed information, you can feel confident when deciding if you should apply for it.
The information here is designed to help you make important decisions about things that may help your business. We offer more information and blogs on similar topics, too, so be sure to check them out when you have time.