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An estimated 10.6 million Americans work as independent contractors in the United States, with 15% being in Virginia. As a result, many Virginians and supporting areas are left wondering if they, too, will receive funds needed during the Covid-19 pandemic. In addition to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, $349 billion dollars are designated for the Paycheck Protection Program (PPP) loan.

The Paycheck Protection Program essentially helps small business owners keep their workers on payroll by giving them a direct incentive to do so.


Why Is PPP so Important During Covid-19?

Covid-19 has led the entire world to a standstill. While the world is slowly healing, you also need to look at the economic complications that have sprung up. Which is why many states across the USA have decided to reopen their businesses. However, it is not as easy as it sounds. Small and Medium business owners are among the most impacted.

To boost the economy, it is crucial that sole proprietors, contractors, and self-employed businesses thrive in the coming months. That being said, there’s a good chance that Covid-19 has impacted the way you do your businessTherefore, PPP loan can be crucial for you to keep your business afloat in difficult times like these.

Those who are self-employed, sole proprietorships, and independent contractors are also eligible to receive funds through SBA lenders. Starting in April 2020, workers can find an eligible lender to apply for the PPP loan. There are three standards you must meet before applying for the loan, though. You must have been in operation on February 15, 2020, and directly impacted by the Covid-19 outbreak. Finally, documentation will be required for the application. As of April 16, 1,661,367 loans have been approved under the Paycheck Protection Plan.


Who is Eligible for PPP Loan During


The following entities affected by Coronavirus (COVID-19) are eligible for Payment Protection Program (PPP):


● If you meet SBA’s size standards for a small business. This could be either under the industry-based sized-standard or the alternative size standard.

● Companies, 501(c)(3) non-profit organizations, 501(c)(19) veterans organizations, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:

  1. 500 employees
  2. Meeting the SBA industry size standard if more than 500 people are employed.

● Any business with a NAICS Code (that begins with 72 Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

● You can even apply as a sole proprietor, contractor, and self-employed person.

 Note: You need to file your taxes to receive PPP.


How Much Will You Receive in Funds Under PPP and More

  • How much funding can I receive? The maximum loan amount is 2.5x your average monthly or net self-employment income for the past 12 months.
  • What is the interest rate? A fixed interest rate of 1 % over a 2-year term. 
  • What can I use these funds for? Replacement of your 1099 or net self-employment income (capped at 100,000 for each employee at an annual basis), the interest of mortgage, rent under lease agreements, and utilities. All expenses must have been in standing before February 15, 2020. 
  • Do I have to make my payment within 30 or 60 days? Neither. Payments will be deferred for six months. There are no prepayment penalties or fees if paid before the 2-year term.
  • Is there an application fee? No. Small businesses or government agencies can charge any fees for the loan.
  • What documents are needed to apply? Once you have connected with the applying lender, you will need to complete the Paycheck Protection Program loan application, and submit payroll and expense documentation by June 30, 2020. The SBA connects you with a certified lender that will assist you throughout the application process.
  • How long with the program last? Although the application is open until June 30, 2020, borrowers are encouraged by the government to apply sooner than later.

We recommend that you put in your application as early as possible. Even though the $349 billion funding seems significant, it is not enough. Many experts estimate that the amount could run out in days. Hence, you must submit your application as early as possible.


How Much is Eligible for Loan Forgiveness Under PPP?

Borrowers can submit a request directly to the lender used for the application. The request will need to include verification of the number of full-time employees and pay rates (must equal to 75% used funding), along with the mortgage, lease, rent, and utility obligated payments.

A lender can make a forgiveness decision within 60 days. SBA guidelines make some provisions regarding forgiveness conditions too. For instance, it will forgive loans if all employees are on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. 

You do not need to personally guarantee this loan. However, you will need to certify in good faith that you require the PPP loan due to current economic uncertainties to keep running your operation. This includes employee retention, interest-based obligations, and the mandate that non-payroll cost not exceed more than 25% of the loan. The borrower acknowledges that the information is true. And if there is fraudulent use of funds, the government can pursue criminal charges. 


The Bottom Line

The Paycheck Protection Plan (PPP) hopes to ensure that businesses will thrive during the Covid-19 outbreak. It also aims to minimize coronavirus’ impact of unemployment and economic loss. As a small-business owner or an independent contractor, it is crucial to give your business the boost it needs during this pandemic.

The world will soon recover, and it will be business as usual. The PPP can also assist self-employed people and those dependent on them to get back on their feet. As the applications have resumed, it is vital to register yourself as soon as possible and give yourself the chance to ride this difficult time with some relief.

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