PPP Application Guide for Gig Workers & Self-Employed - SBA PPP Loan

How to Calculate Your PPP Loan as a Sole Proprietor, Independent Contractor, or Self-Employed Individual

Gig Workers Eligible for PPP

Did you receive a 1099 in 2019 or 2020? You’re eligible for PPP! The SBA released a big change to the PPP program in early March that impacts gig workers and self-employed individuals. Not only does it make PPP loans more accessible, but this rule also permits larger loan requests for the smallest of businesses.

Sole proprietors, independent contractors, and self-employed individuals can now use their total gross income to calculate their PPP loan amount. Previously, you were required to substantiate a loan based on net profit or loss – many borrowers in this group were excluded as a result of limited or negative numbers, or the loan amount calculated after expenses was so small that it wasn’t worth the hassle of applying.

The SBA realized this cohort was being penalized based on profitability, which wasn’t a factor for larger businesses. The new calculation method levels the playing field and ensures that you can get the funds you need.

Here’s how to estimate your maximum loan request.

If you do not have employees:

*Important Note: If your gross income is more than $100,000, round down to $100,000 before you start the calculation. This is the maximum amount you can use for your own payroll.

  1. Find your 2019 or 2020 Schedule C.
  2. Locate the amount listed on Line 7. If it’s over $100,000, round down to $100,000 (see note above).
  3. Divide your Line 7 number by 12 (to calculate your average monthly income) and multiply by 2.5. That’s your loan request!

Example:

Line 7 = $100,000
$100,000 / 12 = $8,333.33
$8,333.33 x 2.5 = $20,833.33

Your loan request is $20,833.33.

Schedule C Gross Income: Line 7
Schedule C Form – Gross Income: Line 7

If you have employees:

*Important Note: This is a two-step calculation that directs you to subtract your employee costs before adding them back in later. While this may seem unnecessary, it’s a fail-safe to ensure you don’t request the wrong amount based on your payroll as an individual. If your ownership payroll is more than $100,000, round down to $100,000 before moving on to the next step. $100,000 is the maximum allowable payroll for individuals.

  1. Find your 2019 or 2020 Schedule C
  2. Locate the amount listed on Line 7.
  3. Subtract your employee costs (Lines 14, 19, and 26).
    • This results in your individual payroll as the company owner. If it’s over $100,000, round down to $100,000 (see note above).
  4. Add up your employee costs (amounts shown on Lines 14, 19, and 26).
  5. Add your individual payroll (step 3) plus your employee payroll (step 4).
  6. Divide by 12 (to get your average monthly payroll) and multiply by 2.5. That’s your loan request!

Example:

Line 7 = $100,000
Lines 14, 19, & 26 = $20,000 + $10,000 + $50,000 = $70,000

  • Individual Payroll:
    • $100,000 – ($20,000 + $10,000 + $50,000) = $30,000 (not over $100,000, so no need to round down)
  • Employee Payroll:
    • $20,000 + $10,000 + $50,000 = $70,000
  • Total Payroll:
    • $30,000 + $70,000 = $100,000
  • Loan Calculation:
    • $100,000/12 = $8,333.33
    • $8,333.33 x 2.5 = $20,833.33

Your loan request is $20,833.33.

Schedule C Example Employee Costs: Lines 14, 19, & 26
Schedule C Form – Example Employee Costs: Lines 14, 19, & 26

If you’re a gig or self-employed worker interested in applying for a PPP loan through Liberty SBF, ensure you’re eligible by confirming the below:

  • You reported annual gross income (Schedule C, Line 7) of $24,000 or more on your 2019 or 2020 Schedule C.  
  • You have access to the following documents for substantiation: 
    • 2019 or 2020 IRS Form 1040 Schedule C 
    • 1099s, if received, to support annual gross income on submitted Schedule C 
    • For first draw loans: Proof that your business was operational on 2/15/2020, such as a utility bill or bank statement
    • For Sole Proprietors with an EIN and employees: Payroll reports that substantiate Lines 14, 19, and 26 on submitted Schedule C 

Our secure online portal enables you to complete your application in less than 30 minutes. Get started today!

Liberty SBF does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Liberty SBF PPP Loan Processing Policy Update
Based on SBA’s Interim Final Rule related to Schedule C Filers
As of 3/3/2021

We will not be processing loans utilizing the new Gross Income methodology for first draw applicants who present a Schedule C, Line 7 greater than $150,000.
We are only offering the new Gross Income methodology for first draw applicants who meet both of the below criteria:
– Schedule C, Line 7 less than $150,000.
– The new Gross Income methodology results in a higher loan than the old methodology.
If a first draw applicant’s Schedule C, Line 7 is under $150,000 and the new Gross Income methodology results in the same loan amount as the old methodology, we will process using the old methodology.
These guidelines apply only to loans without a signed 2483 application. If an applicant signed Form 2483 prior to 3/5/2021, we will not be recalculating the loan.