Can I get a PPP loan if I just started my business this year?

In this 2-minute read:

  • Can I apply for a Paycheck Protection Program loan if my business started in 2020?
  • What if I have a seasonal business?

Entrepreneurs are regularly starting new businesses. That’s how the American economy stays strong and continues to move forward. With current circumstances of the COVID-19 pandemic though, new businesses might be having a harder time in 2020 than they imagined. 

Under the new CARES Act and Paycheck Protection Program (PPP), businesses are able to apply for loans to help them mitigate the financial impacts of this crisis. But are new businesses eligible?

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help! Click here to learn more.

Do I still qualify for a PPP loan if I started my business in 2020?

Depending on when your business was established, you may still qualify for a PPP loan. Your business must have been in operation as of February 15, 2020 in order to apply for a PPP loan. 

For most businesses, PPP loan amounts are calculated based on average payroll costs over the past year. However, due to the nature of your new business, you can calculate your loan amount based on your average average total monthly payroll costs incurred from January 1, 2020 to February 29, 2020 and multiply that by 2.5.

What if I just started as an independent contractor or am self-employed?

The exception appears to be for sole proprietors, independent contractors, and self-employed individuals. In a supplemental letter on 4/14/20, the treasury department stated:

Regardless of whether you have filed a 2019 tax return with the IRS, you must provide the 2019 Form 1040 Schedule C with your PPP loan application to substantiate the applied-for PPP loan amount and a 2019 IRS Form 1099-MISC detailing non-employee compensation received (box 7), invoice, bank statement, or book of record that establishes you are self-employed. You must provide a 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020. 

[You will need to provide your lender with payroll, tax, and business documentation. We’ve compiled a list of required documents your lender will likely ask for HERE.]

Finally, although the Act makes businesses in operation on February 15, 2020 eligible for PPP loans, the Administrator, in consultation with the Secretary, has determined that self-employed individuals will need to rely on their 2019 Form 1040 Schedule C, which provides verifiable documentation on expenses between January 1, 2019 and December 31, 2019. For individuals with income from self-employment from 2019 for which they have filed or will file a 2019 Form 1040 Schedule C, expenses incurred between January 1, 2020 and February 14, 2020 may not be considered because of the lack of verifiable documentation on expenses in this period

Be sure to familiarize yourself with the treasury department’s guidance here.

What if I have a seasonal business? Can I still apply for a PPP loan?

Seasonal businesses can apply for a PPP loan so long as they meet all other eligibility requirements for the program. 

The main difference between seasonal businesses and year-round businesses is that your loan amount will be calculated differently. Rather than using the average monthly payroll costs for the previous year, you will use your average costs from February 2019 through June 2019 to determine how much you can apply for. 

See our full list of PPP FAQs here for more details.

Go deeper: PPP: How do I calculate Average Monthly Payroll and Loan Request Amount?

Womply can help you get the small business funding that’s right for you

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help!

Click here to check out our small business loans resources, or schedule a free, personalized demo of Womply’s small business apps to learn more!

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