Can consultants apply for PPP loans? (important updates!)

In this 4-minute read:

  • Do consultants qualify for PPP loans?
  • What other eligibility requirements should you be aware of?
  • Recent updates to the Paycheck Protection Program
  • Helpful PPP loan resources for independent contractors

The Paycheck Protection Program was put in place to help businesses and individuals during the financial hardship that comes from the coronavirus pandemic. These funds can help keep businesses in operation for several weeks and (as of 2021) can even be used to help pay for damages caused by the riots that occurred in 2020. 

Throughout this program, there has been a little confusion as to who can qualify for these funds though. Rest assured, this program was intended to help all small business owners, independent contractors, sole proprietors, and self-employed individuals, not just what you would think of as typical “brick-and-mortar” businesses that have employees to be concerned about. 

But where does that leave consultants? Where do you fit into this realm of small businesses and can you get a PPP loan?

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Do consultants qualify for PPP loans? (Heath, beauty, strategic, financial, marketing, etc.)

It depends. Whether you are a consultant in the financial, business, marketing, health, beauty, strategic, or any other field, you may well be qualified to receive a PPP loan. The big factor in determining your eligibility for these forgivable loans is your employment classification. 

If you are consulting as an independent contractor, freelancer, sole proprietor, or self-employed individual, then you can and should definitely apply for the PPP loan (if you need additional financial assistance). However, if you fall under the category of employee and are employed by a consulting firm and don’t receive a 1099-misc or other tax form indicative of self-employment (such as IRS Form 1040 Schedule C), then you wouldn’t qualify for a PPP loan (but the owner of the business you work for likely would, as long as the business has less than 500 employees). 

What other eligibility requirements should you be aware of for consultants?

In addition to being an eligible business owner, independent contractor, or self-employed individual, you’ll need to meet a couple of other requirements. 

Currently, you can apply for first or second draw PPP loans. First draw loans would be the first time you are applying for the PPP loan, and second draw loans would be your second round of these funds (if you got PPP funding during 2020, for example).

Eligibility requirements for first draw loans (this is not an exhaustive list):

  • Beyond being an independent contractor, sole proprietor, self-employed, or other eligible type of business owner, you must also have been in business as of February 15, 2020

Eligibility requirements for second draw loans:

  • You must have already received a PPP loan
  • You must have spent your first PPP loan funds by the time your second loan funds are disbursed
  • You must be able to show that your revenue reduced by 25% or more in any 2020 quarter compared to 2019
  • (You also can’t have more than 300 employees)

Check out these FAQs for special circumstances on PPP loan eligibility:

Recent updates to the Paycheck Protection Program that may mean big increases in funding for consultants

Some recent updates to the Paycheck Protection Program may come as an advantage to consultants who wish to apply:  

  • An exclusive application period was instituted between February 24, 2021 and March 9, 2021, where only business with fewer than 20 employees may apply for the PPP loan—allowing priority access for America’s smallest businesses
  • Applicants who are delinquent on student loans can now apply for the PPP loan
  • Non-citizen businesses with an ITIN that are lawful residents can apply for PPP loans
  • On February 22, 2021, the Biden-Harris administration announced important PPP rule changes that will allow PPP borrowers who file using IRS Form 1040 Schedule C to use GROSS profits, rather than NET profits, to calculate their maximum PPP loan amount. Read more here, and see the new rules, and the new PPP application form for Schedule C applicants.

Helpful PPP loan resources for consultants who are independent contractors

We understand small businesses, and we know that there are a lot of questions still around this program and how it impacts independent contractors. We’ve put together several resources in order to help you along the way. 

Use these resources to guide you through the PPP loans:

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