In this 6-minute read:
- NEW UPDATE 8/2021! SBA PPP Direct Forgiveness Portal announced
- How freelancers should calculate their max loan amount for PPP loans
- How to spend your PPP loans to receive full loan forgiveness
- How do freelance content creators apply for loan forgiveness?
URGENT PPP FORGIVENESS UPDATE: On July 28, 2021, the SBA announced big news (for most PPP borrowers). The SBA has established an online PPP forgiveness platform called the 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.
In the world of the ongoing pandemic, the SBA and U.S. Treasury Department renewed the Paycheck Protection Program early in 2021 to continue to offer assistance to businesses facing financial challenges during this time. Small business owners, sole proprietors, independent contractors, and self-employed individuals alike can all take advantage of this program to keep business operations moving forward.
Freelance content creators like graphic designers, web developers, content writers, influencers, streamers, and more can apply to receive forgivable funding through this program. But due to the nature of the self-employed nature of your job, it might work just a little different for you (for the better).
Read on to learn how freelancers can and should spend their PPP loan proceeds in order to receive full loan forgiveness.
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How freelancers should calculate their max PPP loan amount
Before you apply for your PPP loans—or as your apply—you’ll need to calculate the maximum loan amount for which you are eligible. Follow the steps below to gather this amount.
- Get your 2019 or 2020 IRS Form 1040 Schedule C. As of March 2021, you can either select line 31 (for your net profit) or line 7 (for your gross profit) to calculate your max loan amount. If your 2020 taxes aren’t filed yet and that’s the year you want to use, just fill out your taxes as your normally would and grab the line number that you need. Just be sure that number doesn’t exceed $100,000—if it does, then lower it to $100,000
- Calculate your average monthly profit by taking the number from Step 1 and dividing it by 12
- Multiply your average monthly profit by 2.5 (this can’t exceed $20,833)
- You also have the option of adding any outstanding amount of an EIDL loan that was made between January 31, 2020 and April 3, 2020. Don’t add any advance that you received on the loan though because that advance doesn’t have to be repaid
These steps will give you your max PPP loan amount, which is tremendously helpful to know before you start planning how to spend your funds.
The ability to choose gross profit versus net profit is an update that took place in March 2021. If you are unsure which line to choose, choose the one that gives you the most funds. Learn more about gross versus net income for Schedule C applicants.
How to spend your PPP loans to receive full loan forgiveness
Freelance content creators without employees have different ways that they can spend their PPP loan from the traditional brick-and-mortar business owners who have employees. We’ve put together a list of all eligible expenses for the PPP loan for self-employed individuals so that you can appropriately allocate your funds and receive full loan forgiveness.
Payroll or income
At least 60% of your PPP loan has to go towards payroll expenses. That’s the rule across the board for all businesses that apply. The exception for self-employed individuals without employees is that you can choose to put 100% of this loan towards your income. However, you can also put up to 40% of your loan towards these other eligible expenses.
Mortgage, rent, utilities
Are you renting or do you have a mortgage on an office space? Do you pay utilities for that office space? Those are eligible expenses for the PPP loan. Even if you work from home with a dedicated office space there, you can apply for PPP funds towards those expenses–basically any portion of your rent, mortgage, or utilities that you can deduct for your business taxes is eligible for the PPP loan.
Expenses for operations
The SBA understands the importance of keeping business operations moving forward, and that it often takes more than just manpower to run a smooth operation. And so, certain operational expenditures can be paid for with PPP funds.
Any business software or cloud computing services that help your business facilitate essential functions for product or service delivery, sales, payment processing, or tracking expenses are eligible expenses. For freelancers, that might be programs that you subscribe to for creating your content, apps for invoicing, or project management systems.
Interest payments on debts
If you are paying interest on any debts that you acquired before February 15, 2020, then you can use your PPP funds to help with those payments. Maybe you have a business loan or credit card. Use your PPP loan to help pay the interest on it.
Supplier costs
Do you have inventory that you need to keep stocked for your business? Maybe you go through a lot of paper, printer ink, or other supplies. Any essentials supplies for your business that are a part of a contract or purchase order that you made before the covered period of your PPP loan starts are eligible expenses.
Worker protection
COVID-19 protection is an important part of this program, not only protection from financial crisis, but also physical protection to keep workers and their customers safe from spreading the disease. So any costs that you’ve incurred to help with this cause—PPE and other items associated with physical distancing (sneeze guards, business space expansion, air pressure ventilation, and more)—are eligible expenses.
Damage to property
If your business is among those damaged by the riots and public disturbances that took place in 2020, then you may be eligible to use some funds for damages. Only costs that weren’t covered by insurance can be covered with your PPP funds.
Make sure you track your expenses well so that you can verify where these funds went and receive full loan forgiveness.
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How do freelance content creators apply for PPP loan forgiveness?
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.
There is an application for PPP loan forgiveness, and different types of businesses use different forms. You’ll just need to talk to your lender to get the right form for you. See the new PPP applications and forgiveness forms.
As you’re filling out your application, gather any documents that you might need to verify your expenses: receipts, invoices, bank statements, etc.
If you don’t qualify for the SBA’s PPP Direct Forgiveness Portal discussed above, turn your forgiveness application and documents back into your lender and they will file it with the SBA and notify you when a decision has been made. (Note: the majority of SBA lenders now use electronic methods to fill out PPP application and forgiveness forms, so be sure to check with your lender to see how they manage their process.)
You may also like: How do I check the status of my PPP loan?
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