In this 7-minute read:
- What types of interior designers can qualify for PPP loans?
- PPP updates that can allow independent designers to apply for more funding
- How to calculate your maximum PPP loan amount
- How should interior designers spend their PPP funds to receive loan forgiveness?
- Apply for loan forgiveness at the end of your covered period
The PPP program was created to help small businesses like yours during an unpredictable time. Whether business has slowed down or been busier than ever throughout the pandemic, this funding can help provide some relief.
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Can interior designers and similar businesses receive the PPP loan?
Many interior designers can absolutely receive the PPP loan. It largely depends on your employment status. In order to qualify for this program, you must be a small business owner, an independent contractor, a sole proprietor, or an otherwise eligible self-employed individual. And you must have the tax documentation to back up that status.
On the other hand If you are employed by an interior design agency or other business and receive a W2, then you wouldn’t qualify for the PPP loan with your W2 job. However, if you do independent design contract work on the side or have another business outside of that job, then you could apply for the PPP loan with the job that meets that qualifying employment status, provided you meet the $4800 annual revenue minimum.
Beyond your employment status, there are a few other eligibility requirements you’ll need to meet before you can apply. (This is not a complete list of eligibility requirements.)
If you are applying for a first draw loan (this is your first PPP loan), then you also must have been in business as of February 15, 2020.
If you are applying for your second PPP loan, then you must have already received the PPP loan and spent it on authorized uses before your second draw loan disbursement comes through, you must be able to show a revenue reduction of 25% or more when comparing any 2020 quarter to 2019, and you must have fewer than 300 employees.
For a more exhaustive list of requirements and special circumstances, please visit our PPP FAQ.
PPP updates for 2021 that allow many interior designers the chance to qualify for more funding
Your interior design business may qualify for more PPP funding due to some amendments made to the program in February 2021:
- 1040 Schedule C borrowers (most independent contractors and small businesses file taxes in this manner) may now choose to use their gross profits (instead of net) to calculate their maximum loan amount. This could push some borrowers over that minimum earning threshold and it allows you to apply for a larger loan
- Borrowers who have student loan delinquency may now apply for the PPP loan
- Non-citizen borrowers may now apply for the PPP loan if they are lawful residents with an ITIN
Learn more about 2021 PPP rules updates for Schedule C borrowers.
How to calculate your maximum PPP loan amount
It’s important to understand that there’s a limit to the amount that you can receive with the PPP loan. There’s a specific calculation in place to determine this amount.
For interior designers who are self-employed without employees, you’ll use the following steps to calculate your max loan amount:
- Get your 2019 or 2020 IRS 1040 Schedule C (you can choose which year to use). On that form, find line 7 for your gross profits–you may also elect to use line 31 for your net profits, but using your gross profits will get you a larger loan. If this number is larger than $100,000, then reduce it to $100,000.
- Take your number from step 1 and divide it by 12 to get your monthly average profit.
- Multiply your average monthly profit by 2.5 to get your maximum loan amount.
- If applicable, you may also add any outstanding amount of your Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 to your maximum loan amount.
Have you hired employees for your interior design business? Our FAQ will show you how to calculate your maximum loan amount if you have employees.
How should interior designers spend their PPP funds to receive loan forgiveness?
A huge appeal of the PPP loan is that it can be fully forgiven. In order to receive full loan forgiveness, you need to spend your funds on these SBA-approved expenses.
Payroll and income
First, you need to spend at least 60% of your PPP loan on payroll costs. If you have employees, then that 60% (or more) must go towards keeping your staff employed and maintaining their compensation levels (as well as your own).
If you are self-employed and don’t have any employees, you can use this portion of the loan (up to 100% of it) to pay your own income.
Other eligible business costs
The other (up to) 40% of your PPP loan can be used to help with eligible costs that your interior design business may have. These include:
- Mortgage, rent, utilities: any payments you make on these expenses that are related to your business. Even if you work out of your home, you could use your PPP loan to pay any of these expenses that you would deduct from your business taxes
- Operational expenditures: any costs for business software or cloud computing services that help with necessary business functions, like payment processing, inventory management, accounting, invoicing, product or service delivery, and other sales and billing software
- Interest payments on debts: any interest payments on debts related to your interior design business (credit cards, business loans, etc.)
- Supplier costs: any costs associated with a purchase order or contract that was in place prior to the first day of your covered loan period
- COVID-19 protection: any costs to help maintain public health guidelines around COVID-19 (PPE, sneeze guards, cleaning supplies, business expansions, etc.)
- Property damages: any costs for property damages that occurred due to the 2020 public disturbances and were not covered by insurance
Be sure to keep track of how you spend your PPP loan, especially if it’s not just going toward your own income. This will help set you up to receive loan forgiveness.
Apply for PPP loan forgiveness at the end of your covered period
After you’ve spent your PPP funds and reached the end of your covered loan period, you’ll have within 10 months to apply for loan forgiveness. The process is relatively simple and quick, so we recommend doing this as soon as you can.
To apply for loan forgiveness, you should first check if your lender has opted-in to the new SBA PPP Direct Forgiveness Portal. If your PPP loan was for $150,000 or less, AND if your lender has opted-in to the use of the platform, you will be able to submit your PPP loan forgiveness application online directly to the SBA, using the electronic equivalent of SBA Form 3508S. For full details, read our post about the new SBA PPP Direct Forgiveness Portal and other recent rule changes.
If the above doesn’t apply to you, contact your PPP lender and complete the correct application form:
- Ask your lender for the appropriate forgiveness application (Note: most lenders now use electronic application processes, but each SBA lender is allowed some flexibility in the procedure, so be sure to follow their instructions)
- Gather any necessary verifying documents to show how your funds were spent, and complete the application with your lender
- Turn everything back with your lender
- Your lender will process this with the SBA and inform you when a decision has been made
All communication for the PPP loan will be between you and your lender, so stay in touch with them. Once you hear that your loan has been forgiven, you don’t have to pay anything back!
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