Can independent contractors & self employed get a first or second draw PPP loan in 2021? (new FAQs!)

In this 5-minute read:

  • Can independent contractors, sole proprietors, and self-employed business owners get a first or second draw PPP loan this year?
  • What about truckers, gig workers, farmers, online stores, content creators, cosmetologists, freelancers, upwork/fiverr workers, Uber/Lyft drivers, etc.?
  • Multiple 1099s?
  • How do I calculate the max PPP loan amount?
  • What changes does the PPP loan have in 2021?
  • PPP FAQs about independent contractors and self-employed individuals

IMPORTANT PPP UPDATE FOR INDEPENDENT CONTRACTORS, SOLE PROPRIETORS, AND SELF-EMPLOYED INDIVIDUALS: As of March 3, 2021, applicants who report their income with IRS Form 1040 Schedule C (i.e., most independent contractors, 1099 workers, and sole proprietors) will be able to use their GROSS (instead of net) profits to determine their max loan amount. This can make a big impact on the amount you can borrow, depending on how much you make and how you have reported your profits. Read more about the latest 1040 Schedule C/PPP loan rules changes, and see the new rules, and the new PPP application form for Schedule C applicants.

The Paycheck Protection Program (PPP) is back in 2021! With a renewal of $284 billion, the PPP loan opened back up the week of January 11, 2021 to provide support to America’s small businesses that have been impacted by COVID-19 and the riots throughout this past year. 

Like the first round/s of the PPP funding during 2020, this renewal is intended to help all small businesses survive, including independent contractors, sole proprietors, and self-employed business owners. Read on to learn what changes are taking place and how you can get your second (or first) draw of the PPP loan. 

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Can independent contractors and sole proprietors get a second draw PPP loan if they got a PPP loan in 2020?

The short answer: yes they can! But there are certain eligibility requirements that all businesses must meet in order to apply for a second draw PPP loan:

  • Businesses that received a First Draw PPP loan must use or have already used their full amount for the authorized uses only (more on this below)
  • The business must have 300 or fewer employees
  • The business must be able to show at least a 25% reduction in their gross receipts between comparable quarters in 2021 and 2020

If you never received a First Draw PPP loan, have returned some or all of your previous First Draw PPP loan, or didn’t accept the full amount of the First Draw PPP loan in 2020 for which you were eligible, then you may apply for a First Draw PPP loan again in 2021. 

To apply for either a first or second draw loan, you must apply by May 31, 2021 through an existing SBA 7(a) lender or other federally insured depository institution or lender participating in the Paycheck Protection Program. 

Are truckers, gig workers, farmers, online stores, content creators, freelancers, Uber drivers, cosmetologists, etc. eligible for PPP loans?

Pretty much anyone who has 1099 income can apply for a forgivable PPP loan. Some examples of jobs that might be eligible for these loans and may not know it include:

  • Uber drivers
  • Amazon contractors
  • Doordash couriers
  • Many types of gig workers
  • Content creators
  • Freelancers
  • Cosmetologists
  • People who rents out their house on Airbnb or similar platforms
  • Pretty much anyone who gets a 1099 

Go deeper:

Can I apply for PPP loan if I have a “regular” W-2 job and a side 1099 job?

You sure can! Pretty much anyone who has 1099 income can apply for a PPP loan. 

What if I have multiple independent contractor jobs? Can I apply for a PPP loan?

Yes. You just add up the profit from all your 1099s and apply for one PPP loan. You may now use your Form 1040 Schedule C line 7 GROSS INCOME, but if this figure is greater than $100,000 you must reduce it to $100,000.

What if I started my business / working as an independent contractor in 2020? Do I still qualify?

You must have been in business prior to February 15, 2020. If you were, then yes, you may apply.

What counts as payroll costs for an independent contractor or self employed individual for PPP loans?

Any wages, commissions, income, cash tips (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips), or earnings that you receive count as payroll. This is capped at $100,000 annually. 

How do I calculate the maximum PPP loan amount if I’m self employed/independent contractor?

Per the SBA:
The following methodology should be used to calculate the maximum amount that can be borrowed if you are self-employed and have no employees, and your principal place of residence is in the United States, including if you are an independent contractor or operate a sole proprietorship (but not if you are a partner in a partnership):

  • Step 1: From your 2019 or 2020 IRS Form 1040, Schedule C, you may elect to use either your line 31 net profit amount or your line 7 gross income amount. (If you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value.) If this amount is over $100,000, reduce it to $100,000. If both your net profit and gross income are zero or less, you are not eligible for a PPP loan.
  • Step 2: Calculate the average monthly net profit or gross income amount (divide the amount from Step 1 by 12).
  • Step 3: Multiply the average monthly net profit or gross income amount from Step 2 by 2.5. This amount cannot exceed $20,833.
  • Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID19 loan (because it does not have to be repaid).

See our PPP FAQs for full details.


If I’m self-employed or an independent contractor, can I use 100% of my PPP Loan toward paying myself?

For full loan forgiveness, you must use at least 60% of your PPP loan on payroll (in your case, this your own income). So, yes, you can use 100% of your PPP loan to pay yourself.

What is different about the 2021 PPP loan?

Along with the updated eligibility requirements for a second draw loan, there are a few other notable changes that independent contractors and traditional business owners alike should be aware of (contractors filing Form 1040 Schedule C should be very aware that they can elect to use their GROSS income in calculating their max PPP loan amounts as of March 3, 2021, as noted above). 

First, for 2021 they’ve added additional forgivable expenses that you can use the 2021 PPP loan towards beyond the initial payroll, rent, utilities, etc. These include:

  • Covered expenses for operations: things like software payments, cloud computing, human resources, and other accounting costs
  • Covered property damage costs: any costs related to damage that was caused by public disturbances in 2020 and is not covered by insurance
  • Covered costs for suppliers: expenses that you have for supplier contracts, purchase orders, or orders for other goods that were in effect before taking out the PPP loan and are necessary for the operation of your business
  • Covered expenses for worker protection: PPE and other investments to help keep your business inline with local and federal safety guidelines related to COVID-19 between March 1, 2020 and the declaration of the end of the national emergency

A few more updates that may impact your business (more of these will impact traditional small businesses than independent contractors):

  • Receivers of the loan can set their covered period to be any amount on time between 8 and 24 weeks
  • Expanded eligibility applies to destination marketing organizations, housing co-ops, and 501(c)(6)s
  • More flexibility has been allotted for seasonal employees
  • First Draw PPP loans can be modified by certain existing borrowers
  • Certain existing borrows may be eligible for a Second Draw PPP loan (as noted above)

For a more detailed look at how you can spend your PPP loan, check out our article: PPP 2021: what are the additional covered / forgivable expenses compared to 2020?

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