In this 7-minute read:
- Are home service providers like plumbers, inspectors, electricians, appraisers, etc. eligible for the PPP loan?
- New rules that allow even more home service providers to qualify for the PPP loan (and potentially a larger loan)
- What is the maximum PPP loan amount home service providers can take out?
- How to spend your PPP funding to get loan forgiveness
- Steps to apply for PPP loan forgiveness
Do you provide services for your customers’ homes? Maybe you’re a home inspector, painter, plumber, electrician, carpenter, appraiser, or something else entirely. Whatever it may be, you could be eligible to receive stimulus funding through the Paycheck Protection Program.
This program was set up in spring 2020 to help small business owners and self-employed individuals keep their business operations going, and America’s workers employed, during this financially trying time through the coronavirus pandemic. A huge bonus is that these loans can be completely forgiven (meaning you don’t have to pay anything back) if you follow the rules on how to spend your funds. Read on to see if you qualify for the program.
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Are home service providers, electricians, inspectors, appraisers, electricians, etc. eligible for the PPP loan?
It doesn’t matter what type of home service you provide, you may be able to apply for the PPP loan. What matters is your employment status for that job. Are you the business owner, an independent contractor, sole proprietor, or self-employed individual? If the answer is yes, and you can verify that status with your tax filings, then you meet the first qualifier for PPP loan eligibility.
If you are employed by a home services company and receive a W2 for the work you do, then you wouldn’t be able to receive the PPP loan with your W2 job. However, if you have a side gig or other independent contractor work that qualifies you in the “self-employed” category, and you file those earnings using IRS form 1040 Schedule C, you could apply for the PPP loan if you meet the rest of the eligibility requirements.
Just being a business owner or self-employed isn’t enough, there are additional requirements you must meet before you can apply for the loan. But most of the requirements, for first draw loans especially, are pretty easy to meet. And there are a few amendments to the rules that allow even more individuals to apply (we’ll get to that shortly).
There are different eligibility requirements depending on if you are applying for your first or second PPP loan.
For first draw loans, you’ll need to meet the minimum earning threshold of $4800 in a year, and you must have been in business as of February 15, 2020. If you started your business after that, you aren’t eligible for PPP funding at this time.
For second draw loans, you’ll need to meet the following eligibility requirements:
- You must have received a previous PPP loan and spent your funds on authorized expenses before your second draw loan disbursement comes in
- You must be able to show that your revenue has reduced by at least 25% when comparing any quarter in 2020 to 2019
- You must have fewer than 300 employees
New 2021 rules that allow even more home service providers to qualify for the PPP loan (and a larger loan)
As of February 2021, there are some new PPP rules that allow more people to apply for the PPP loan:
- Borrowers that file IRS 1040 Schedule C can now elect to use their gross profits (instead of net) to calculate their maximum loan amount. This can help push more people over that minimum earning threshold to qualify, and may allow those who were already eligible to apply for a larger loan (maximum PPP loan calculations are based on annual earnings/payroll; see more below)
- Borrowers who are delinquent on their student loan payments are now eligible for the program
- Non-citizen borrowers may now apply for the PPP loan so long as they are lawful residents and have an ITIN
What is the maximum PPP loan amount independent home service providers or businesses can take out?
PPP funding is limited, so there are specific calculations in place to determine how much you can qualify for. The following calculation is what you should use if you are self-employed, independent contractor, or sole proprietor without employees:
- Get your 2019 or 2020 IRS 1040 Schedule C (you choose which year to use). Find the number on line 7 (for your gross profits) to use in the next step. If the number on line 7 is greater than $100,000, lower it to the maximum of $100,000.
- Take your number from step 1 and divide it by 12 to get your average monthly income.
- Multiply your average monthly income by 2.5 to get your maximum loan amount.
- If applicable, you can 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. Just be sure not to add any advance from that loan since that doesn’t need to be paid back.
Do you have employees for your home services business? Then check out our FAQ to calculate your maximum loan amount.
How to spend your PPP funding to get loan forgiveness
While the SBA has been pretty generous with how PPP borrowers track their expenditures for the loan, you should be aware of the approved expenses that have been set in place to make sure that these funds are spent appropriately. Spending your loan on the following approved expenses will just help ensure that you get your loan forgiven.
Payroll/income
First, you must spend at least 60% of the PPP loan on payroll costs. If you are self-employed without employees, that entire amount (up to 100% of the loan) can legally go towards your own income. If you have employees, you’ll need to make sure that you maintain them on staff and keep their current compensation levels, and provide payroll records when you apply.
Read more about what documents are required to apply for PPP loans.
Other approved expenses
The SBA recognizes that businesses have costs to keep operations moving, so they’ve approved several other expenses for which you can use the other (up to) 40% of your PPP loan.
- Mortgage, rent, or utilities: this includes any payments on these expenses related to your home services business. If you have an office (even a home office) that you operate out of, you can use your PPP loan to help cover any portion of that payment that you would deduct from your business taxes
- Interest payments for debts: you can use your PPP funds to help pay the interest payments on business-related debts like credit cards, business loans, vehicle loans, or equipment financing
- Operational expenditures: this is any business software or cloud computing service that helps in essential functions for your business, like sales and billing functions, payment processing, invoicing, accounting, inventory tracking, or something else that helps with product or service delivery
- Supplier costs: you may use your PPP loan to help with payments to suppliers for contracts or purchase orders that were in place before the first day of your covered loan period
- COVID-19 costs: your PPP loan can be used to help cover costs that you’ve incurred that are related to adhering to COVID-19 safety guidelines, like PPE, cleaning supplies, or business expansions to help with social distancing
- Property damages: the riots in 2020 caused significant property damages to businesses across the country. If your business was impacted, you can use your PPP funds to help pay for costs that weren’t covered by insurance
Keep good documentation of how you spend your PPP funds so that you are prepared when it’s time to apply for loan forgiveness.
Helpful resource: Tracking PPP expenses to maintain forgiveness (tools and tips!)
Steps to apply for PPP loan forgiveness
When it’s all said and done, you can apply for loan forgiveness and if your application is approved you will not have to worry about having to pay anything back! You can put your forgiveness application after the last day of your covered period. You’ll have within 10 months from the end of your covered period to complete and process your application.
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 correct forgiveness application for your business type and situation. There are multiple forms, so they’ll get you the right one. Check out the new forgiveness application forms for 2021.
- Fill out your application and gather all of the documents you need to verify your expenditures (bank statements, invoices, receipts, etc.). Most lenders are using electronic processes to gather this information, so work with your lender on their process.
- Turn everything into your lender and follow their processes to get your application submitted it to the SBA.
- When a decision has been made, your lender will reach out to notify you either way. If you followed all the rules, chances are you’ll never have to pay this loan back.
Learn more: Do I have to pay back my PPP loan?
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