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SBA loans: We can help you get an emergency loan for COVID-19

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SBA loans: We can help you get an emergency loan for COVID-19

Click to learn more

What types of expenses are approved under PPP loans?

April 22, 2020

In this 3-minute read:

  • What expenses can my business use the PPP loan on?
  • 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.

Womply is acting as a facilitator to connect American small businesses to SBA-authorized lenders to get emergency loans for COVID-19 relief. Start your free application here, or call us at 855-208-8813 for a free consultation.

What expenses can my business use the PPP loan on?

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. 

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 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
  • Utilities
  • Other legitimate business expenses

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 as well, as demonstrated on your 2019 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. 

For full details on PPP application and forgiveness FAQs for independent contractors and other 1099 individuals, please see here, and 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?

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 forgiven, at least 75% of it must be used to maintain employment and payroll levels. 

Other forgivable expenses include rent, utilities, and mortgage payments.

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.

It’s not too late to apply for a PPP loan! Womply can help

Womply is an approved loan agent working with SBA 7(a) lenders that can help you through the process of applying for a PPP loan. Our team will pair you up with an eligible lender and provide you with the resources necessary to answer your questions about the Paycheck Protection Program. 

To start your free application, click here or reach out to us today at 855-208-8813 for a free consultation.

Over 450k small businesses use Womply software. Now we’re helping you get the emergency PPP funding you need, ASAP.

By clicking “Start My Application”, I understand and agree that this program is subject to the PPP Loan Program Terms and the Service Agreement.

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