IMPORTANT UPDATE FOR 2021
Congress has approved an extension of the PPP loan program. SBA will accept applications through May 31, 2021, including “second draw” PPP loans for businesses that received PPP funding in 2020. IN ADDITION, PPP loans will now cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures. Start your PPP loan application now!
In this 3-minute read:
- What expenses can my business use the PPP loan on?
- What are the new approved PPP expenses for 2021?
- What about payments to independent contractors?
- What expenses can be forgiven under a PPP loan?
As businesses are receiving their loans from the Paycheck Protection Program (PPP), it’s important to know what those funds can be used for. Most legitimate business expenses may be approved, but not every expense that you’ll have for your business is forgivable.
We’ll walk you through what you can use your PPP loan for and what expenses can be forgiven.
Get your PPP loan or second draw PPP loan through Womply! Womply has helped over 200,000 businesses get their PPP funding. It’s free to apply for a PPP loan, and Womply can help connect you with an SBA lender that’s right for you! Start your PPP application.
On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, reducing the minimum loan funding that must be spent on payroll to 60%, and easing the requirements for maintaining staffing and compensation levels. Please read the details here.
What expenses can my business use the PPP loan on in 2021?
Your PPP loan funds can be used for any legitimate business expense of the type your business incurred prior to February 15, 2020. That doesn’t mean that you spend the money on expenses you had before that time, but rather that you can only spend your PPP money on the types of business expenses you had up to that point. NOTE: FOR 2021, ADDITIONAL APPROVED EXPENSES HAVE BEEN ADDED. PPP loans in 2021 will now cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures
PPP loans should not be used for new expenses that your business has never had before and are not intended to help expand or grow your business. The purpose of the PPP loan is to help maintain payroll costs and employment, and keep your business running.
PPP loan funding is intended to be used during the “covered period” which includes the 8 weeks (now up to 24 weeks) after your loan is approved. This is why the PPP loan request amount is based primarily on your average monthly payroll expenses multiplied by 2.5.
So, on that note, these are the approved expenses for which you can use your PPP loan:
- Payroll costs, including employee benefits
- Interest on mortgage
- Commercial rent
- IN ADDITION, PPP loans in 2021 will now cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures
Any lease agreements, mortgage plans, employee benefits, etc. must have been set prior to February 15, 2020 in order for these items to be eligible expenses for your PPP loan.
What expenses are approved for independent contractors using the PPP loan?
Independent contractor and self-employed individuals, for the most part, can use their PPP loan on the same expenses as any other business owner. The stipulation here is that any expenses you are using your PPP loans for must have been expenses that you had in 2019-2020 as well, as demonstrated on your 2019 or 2020 Form 1040 Schedule C, which is required for your application to be approved.
PPP loans for independent contractors and sole proprietors must be used to support ongoing operations and may not be used for new expenses or expanding the business. However, you can basically “pay yourself” if you don’t have employees. You may use up to 100% of your PPP funds on your payroll and still have your loan forgiven.
For full details on PPP application and forgiveness FAQs for independent contractors and other 1099 individuals, please read our full article about how independent contractors and self-employed individuals can get PPP loans.
What expenses can be forgiven under the PPP loan in 2021?
As you might have guessed, while you can use your loan funds for the legitimate business expenses discussed above, not all expenses are forgivable under the PPP loan. In order to have part or all of your PPP loan fully forgiven, at least 60% (previously 75%) of it must be used to maintain employment and payroll levels.
Other forgivable expenses include rent, utilities, and mortgage payments. PLEASE NOTE: for 2021, PPP loans will now cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.
For a complete look at how to have your PPP loan forgiven, check out our guide: Do I have to pay back my PPP loan? Here’s how to get your loan forgiven.
PPP FORGIVENESS UPDATE AS OF JUNE 17, 2020
The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.
- Click here for the full PPP loan forgiveness application
- Click here for the new Form 3508EZ application
Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:
- You are self-employed and have no employees; OR
- You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
- You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.
If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.
Let Womply help you apply for your PPP loans!
As you know, it’s free to apply for a PPP loan, and we know you have lots of choices. So why should you let Womply connect you with an approved SBA lender? Because we know what we’re doing and people love the help we provide. We’ve helped over 200,000 businesses, contractors, sole proprietors, and self-employed individuals get approved. Don’t wait! The application deadline is May 31, 2021.
Learn more, plus get free reputation monitoring and customer insights when you sign up for Womply Free!