The SBA PPP Loan Forgiveness Application for Independent Contractors: Everything You Need to Know
If you`re an independent contractor who received a loan through the Paycheck Protection Program (PPP), you may be wondering how to apply for loan forgiveness. The good news is that the Small Business Administration (SBA) has released a loan forgiveness application specifically for independent contractors.
What is the PPP?
The PPP is a loan program designed to help small businesses keep their employees on payroll during the COVID-19 pandemic. Independent contractors were also able to apply for the program and receive a loan based on their net income from self-employment.
How does loan forgiveness work?
The PPP loan can be fully forgiven if the funds were used for eligible expenses, such as payroll, rent, utilities, and mortgage interest. To receive full forgiveness, at least 60% of the funds must have been used for payroll costs. The rest can be used for eligible non-payroll expenses.
How do independent contractors apply for loan forgiveness?
Independent contractors can apply for loan forgiveness using the SBA Form 3508EZ or the SBA Form 3508. The SBA Form 3508EZ is a simplified forgiveness application for borrowers who meet certain criteria, such as not reducing employee salaries or wages by more than 25%.
The SBA Form 3508 is for borrowers who do not meet the criteria for the EZ form. It requires more documentation and calculations, such as a schedule of payroll and non-payroll expenses and a forgiveness calculation form.
What documentation is required for loan forgiveness?
Independent contractors must provide documentation to support their eligible expenses, such as bank statements, tax forms, and receipts. They must also provide documentation to support their forgiveness amount, such as payroll records and proof of non-payroll expenses.
When should independent contractors apply for loan forgiveness?
Borrowers can apply for loan forgiveness any time up to the maturity date of the loan, which is five years from the date of disbursement. However, borrowers who received their loan before June 5, 2020, have the option to use an eight-week or 24-week covered period. They must apply for forgiveness within 10 months after the end of the covered period.
What should independent contractors do now?
Independent contractors should review the SBA`s Loan Forgiveness Application Instructions for Borrowers and gather all the required documentation. They should also consult with their lender or an accountant to ensure they are completing the application correctly and maximizing their forgiveness amount.
In conclusion, the SBA PPP Loan Forgiveness Application for Independent Contractors provides a pathway to full loan forgiveness for eligible expenses. Independent contractors should take the time to review the application and gather all the necessary documentation to ensure a successful and smooth application process.
