GOVERNMENT MONEY FOR FREELANCERS
How to Get a Forgivable Loan from the PPP
The CARES Act authorized $310 billion to the Paycheck Protection Program (PPP). As a freelancer or solopreneur, you could be eligible.
The problem now is time. This past July 1, Congress extended the program until August 8, which means you only have a few days left to get qualified. However, there are other extensions and the proposed stimulus package that could run this date out to December 30th.
How the Program Applies to Freelance Writers & Authors
This article contains crucial information you can pass onto your freelance buddies, but before you get in too far, these are two eligibility requirements you must meet.
1. You were a freelancer or otherwise self-employed on February 15, 2020
2. Your primary residence is in the USA.
You might be wondering how to prove you were. You may also wonder, what is the maximum loan amount, what can you use it for, and how do you qualify for loan forgiveness.
If you filed a IRS Form 1040 Schedule C when you did your 2019 taxes, this would establish your income, profits, or losses. You can use rent or property tax receipts to prove residency requirements.
You can use your PPP loan as “owner compensation replacement,” employee compensation if your employees are US-based, utility payments, business rent (or the portion of your home office), mortgage interest payments (no principal payments or advanced payments), as long as these were noted as expenses on your 2019 Schedule C.
In other words, you can use it to pay yourself and expenses, based on what you reported to the IRS on Schedule C. If that amount was $0 or you lost money, expenses higher than income, you are not eligible.
Take the amount between $1 and $100,000, divide that amount by 12, then multiply that monthly average by 2.5.
The SBA also states, “Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020, and April 3, 2020, that you seek to refinance, less the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).”
You must provide your Schedule C, bank statements, records, and receipts that prove your business was in operation before February 15, 2020.
Will You Need to Repay the Loan?
According to the SBA, “The full principal amount of the PPP loans and any accrued interest qualifies for forgiveness as long as at least 75% of the loan is used for payroll expenses (including self-employment income in the form of “owner compensation replacement”) and the remaining is used for business expenses listed above.”
I used the SBA’s exact wording, so there will be no mistake. Yet everything in this article is for “information purposes only” and cannot be used as, nor considered as legal advice. Consult a lawyer, accountant, a tax expert, or bank official for specific information.
Freelance Union Membership
According to a Freelance Union article, CNN reported, “Bank of America, Wells Fargo, JPMorgan Chase, and US Bank had been sued for allegedly failing to process PPP loans on a first-come, first-served basis. The banks “concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money,” each of the four lawsuits said.”
You can sign up for the Freelance Union here. It’s free.
You’re probably asking yourself, why should I join the Freelance Union. The Freelance Union has spoken directly to Senator Mitch McConnel and requested PPP money be set aside for freelancers and solopreneurs. What they got was $60 billion. Here are a couple of things other things to contemplate when considering union membership.
“The only effective answer to organized greed is organized labor.” — Thomas Donahue
Although it is true that only about 20 percent of American workers are in unions, that 20 percent sets the standards across the board in salaries, benefits and working conditions. If you are making a decent salary in a non-union company, you owe that to the unions. One thing that corporations do not do is give out money out of the goodness of their hearts. — Molly Ivins
What You Need to Know
Many people think this program is just for established small businesses. However, the plan is open to freelancers as well.
As of June 30, there was still $130 billion available for small business loans, which are forgivable under a wide range of circumstances. The Small Business Administration (SBA) has updated and clarified many of the program guidelines, and Congress amended it.
The good news is, in many cases, you as a freelancer or small business owner can go through your local bank or credit union to get approved.
What you should keep in mind is, although this program might expire on August 8, it could get extended again. Therefore, if you already have your paperwork in, you could be first in line for the extension or new program if one gets approved.
Senators Jeanne Shaheen (D) NH and Chris Coons (D) DE last week requested an extension of the program until December 30. They are telling all small business owners to apply now; in case the extension is approved. There is also a chance that there will be more money available in the next stimulus package.
What’s more, many freelancers have gotten approved with help from their bank, while some have used an account or lawyer for assistance. Most of us freelancers already have an accountant or tax expert we can turn to for help. Do it now.
Vital Takeaways
What’s really great about this is that you can use up to eight weeks of 2019 qualified income as “owner compensation replacement,” in effect, it is like an unemployment benefit for freelancers based on what you made in 2019. This portion, expenses, and more are part of the PPP forgivable loan.
Keep in mind; even if you do not qualify for the PPP loan before August 8, you might be under an extension or under the new package, the HEALS Act, as it is called now, but has not been approved as of August 3.
If Congress does away with or cuts back on unemployment benefits of $600, as most say, it will likely mean more money will be available through PPP Loans as businesses reopen.
Do not hesitate to apply. What do you have to lose? I would caution those approved to keep track of exactly how you spend it; if your loan is forgiven, you might be asked for receipts.
What’s more, an SBA executive said he had seen only a handful get turned down.
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Stephen Dalton is a retired US Army First Sergeant with a degree in journalism from the University of Maryland and a Certified US English Chicago Manual of Style Editor. Currently living in the Philippines, Stephen is a Top Writer in Virtual Reality.
You can see his portfolio here. Email [email protected]
