In this 6-minute read:
- Recent PPP rules updates benefit workers and contractors who file a Schedule C (Form 1040)
- Uber, Lyft, Doordash, Postmates drivers: max loan calculation how-to
- How app-based drivers should spend their PPP loans to get loan forgiveness
- What is the PPP loan forgiveness process like for Uber, Lyft, and Doordash drivers?
With multiple rounds of the Paycheck Protection Program, and a little time left to apply for the 2021 loan (apply by May 31, 2021, since the PPP is extended), millions of businesses have received funding to help their businesses through the challenges of COVID-19. Whether they had to shut down and wanted to continue paying their employees or had extra demand that was difficult to keep up with, these funds were a way to help keep the economy moving forward.
Uber, Lyft, Doordash, and other app-based drivers are among those “businesses” that are eligible to receive the PPP loan. As independent contractors for these companies, you are essentially self-employed and the IRS Form 1040 Schedule C that you file for taxes verifies that.
But what can you really spend your PPP loans on? It’s not like you have employees to worry about. We’ll walk you through that in this article and show you how you can receive full loan forgiveness if you receive the PPP loan.
Gig workers, freelancers, sole proprietors, independent contractors, self-employed individuals and more are eligible for PPP loans. Check your eligibility with Womply in as little as 5 minutes, and you could receive up to $50,000 in forgivable PPP loans!
What recent PPP rule changes have potentially huge benefit for Schedule C applicants like Uber, Lyft, Doordash, Postmates drivers?
On February 22, 2021, the Biden-Harris administration announced PPP rule changes that now allow PPP borrowers who file using IRS Form 1040 Schedule C to use GROSS profits, rather than NET profits, to calculate their maximum PPP loan amount. This can have a huge impact on many smaller businesses and independent contractors.
Previously, using their “net” profit amounts, many potential borrowers were unable to qualify for PPP loans since they didn’t earn enough revenue to meet the $4800 minimum annual income for PPP loans. But with this recent rule change allowing GROSS income to be used as the basis for Schedule C borrowers’ maximum PPP loan calculations, many more people may qualify.
Uber, Lyft, and Doordash drivers’ max loan calculation
First, you’ll want to understand how to calculate your maximum loan amount. If you’ve already applied for your first PPP loan, then you’ve already done this. Either way, knowing this number will help you plan the funds that you’ll receive and how you can spend them.
As an independent contractor, this is how you’d calculate your maximum PPP loan amount:
- First, get your 2019 or 2020 IRS Form Schedule C (you get to choose which one you use). On that form (for applicants applying as of March 2021), you can choose line 31 for your net profit or line 7 to use your gross profit for this calculation. If that number is more than $100,000, then reduce it to $100,000. If you haven’t filed your 2020 taxes yet and that’s the form you wish to use, just fill out your tax forms to get that number.
- Divide the number you got in Step 1 by 12 to get your average monthly profit
- Take your monthly average profit and multiply it by 2.5 (this shouldn’t be more than $20,833)
- If you had any outstanding amount of an Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020 you may add that amount to your PPP loan application. Just don’t add any “EIDL advance” that you received since that doesn’t have to be repaid.
Once you have your max loan amount, you can start planning how to allocate those funds. And planning is key if you wish to receive full loan forgiveness.
If you’re unsure which number to use to calculate your PPP loan (your gross or net profit), use the amount that gets you the biggest loan. Learn more about gross vs. net income for Schedule C PPP applicants.
How app-based drivers should spend their PPP loans to maintain loan forgiveness
There is an entire list of approved expenses that the SBA has put together for proceeds from the Paycheck Protection Program. It’s important to know what those are so you can receive full loan forgiveness when that time comes.
The first big rule of how to spend your PPP loan is that at least 60% must go towards payroll, or in the case of self-employed individuals without employees, your income. In fact, if you chose to do so, sole proprietors/contractors/self employed people without employees can legally apply 100% of your loan towards your income if you have no other business expenses you are concerned with. This makes it easy for to these borrowers to spend their PPP funds appropriately.
But if you do have other business expenses, you can choose to spend up to 40% of your loan to help in those areas as well.
Mortgage, rent, utilities
Mortgage, rent, and utilities for business-related spaces are all eligible expenses for the PPP loan. If you manage your jobs from a dedicated office space that you deduct on your taxes, then you could use your PPP loans to help pay for that cost.
Certain operational expenses are eligible for PPP loan covered. This includes any business software or cloud-based computing services that help facilitate sales and billing functions, processing payments, tracking expenses, or product and service delivery. Are there any apps or software you subscribe to in order to fulfill your driver/delivery responsibilities? Then it’s likely an eligible expense.
Interest payments on debts
Did you need to take out a loan or other business-related debt to get started in the driving business? Any interest payments on business-related debts that you incurred prior to February 15, 2020 is eligible for PPP loan coverage.
Supplier costs for inventory that has to be kept up are another eligible expense, so long as these costs are part of a purchase order or contract that was put in place before your covered loan period begins.
In lieu of the ongoing coronavirus pandemic, worker protection costs are now eligible PPP loan expenses. This means anything that helps you protect yourself and the people you come into contact with from COVID-19. Did you have to buy your own PPE or other materials to help limit the spread of COVID-19? Those are eligible expenses for this loan.
The public disturbances and rioting in 2020 caused a lot of damage to businesses and vehicles. If you are among those who were affected by this, you may be eligible to use your PPP loan to help pay for the damages. You can only use your PP loan to pay for any damages that weren’t covered by insurance.
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What is the PPP loan forgiveness process like for Uber, Lyft, and Doordash drivers?
In order to receive PPP loan forgiveness, you’ll need to apply for forgiveness via your lender. There are different applications, so they’ll make sure you get the right one. (See the new PPP loan application and forgiveness forms.)
Make sure to gather any documentation you might need to verify where the funds from your loan went. This could be bank statements, cancelled checks, invoices—anything that shows you spent your funds on approved costs.
Turn all of your documentation in to your lender and they will help you complete the application and submit it to the SBA for approval. All communication for this process will be between you and your lender, so stay in touch with them about the status of your loan forgiveness. They’ll notify you once a decision is made.
You may also like: How do I check the status of my PPP loan?
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