What Was It Like to Apply for an SBA PPP (Paycheck Protection Loan) as a Gig Economy Independent Contractor?

I wanted to share my experience applying for a Paycheck Protection Program SBA Loan as an independent contractor for gig economy apps including Grubhub, Doordash, Postmates and Uber Eats.

I wrote last week about whether self employed independent contractors in the gig economy can qualify for the PPP loans. The bottom line is, yes, self employed individuals are eligible and do qualify. But, what's the experience like? And what is it going to mean for those who do take the loan? What kind of restrictions are there?

The thing is, because this whole thing is so new, there's not as much that is well known about how this works for self employed individuals. This program is supposed to have some loan forgiveness based on your payroll costs. But how does that work when it's your own earnings and you don't have employees? That's what I want to document with this article, and possibly future articles.

Starting the application process through Womply.

Womply.com makes software that helps businesses with customer management. They put together an extensive list of information and FAQ's about the PPP Program for their customers, made up of business owners and sole proprietors. I found their information extremely useful when researching my article about the PPP for gig economy workers.

Womply also established relationships with lenders who are approved with the SBA, and provided an easy one stop place to enter your information and get directed to a lender that can help the business owner and contractor. I decided to apply through them, and I also established a referral relationship with them (meaning that on some larger loan applications I may receive a referral fee if the loan is approved).

The initial signup was pretty easy. You fill in some basic information.

The toughest part of the Womply form: Company Name.

What company name should you enter?

Do not make up a company name. If you incorporated, have an LLC or have registered with your state as a DBA (Doing Business As), then you will use your official company name. If you have no official company name, enter your name. I would suggest you use your full name, not a nickname or shortened name.

I got stuck at first when entering my name. When I typed my name in, I hit enter, and nothing happened. I'm a little slow sometimes, because I hit enter a couple times, tried re-entering, and nothing still.

Here's where it makes sense to look at what's happening when you do this. You can learn from my mistake here. When you enter the first letter or two, you'll see a list of businesses. Save yourself some trouble and click immediately on the part that says “Don't See Your Business?”

At that point, a fuller form appears, and you can fill in the rest of your information. Under business legal entity type, select the type of business that best fits your business. If you don't know what your business type is and you haven't incorporated, choose Sole Proprietor. Under “Monthly Payroll Spend” enter the option that best fits your TAXABLE monthly earnings (money you receive from gig apps minus your expenses/mileage etc.). For most of us, we'll fit into the <$5,000 per month category.

That was everything that I entered on Womply. Notice that I only had to enter contact information on the screen. They do not ask for your Social Security number on this site.

Just a note here – I'm sure you already know this. If you come across any portals like this that are asking for your Social Security Number, run away. You want to verify that the site belongs to the institution that will be handling your loan.

I was then forwarded to Kabbage.com

I'm not sure if they have different banks for different loan amounts or different business types or if all of their referrals go to Kabbage. I did some checking around to verify that Kabbage was legitimate and made sure that I was on a site owned by them before going forward.

If you are applying from a different institution, your process is going to be different. This is what I found. Most places should provide instructions for what documents you want to have available. In this instance, I could scroll down to see two options that tell me what documentation I need. Most of us are going to choose the Sole Proprietor option.

When I clicked on that option, it gave me a list of documents needed.

Pay careful attention to this. The most important thing you need is a Schedule C. Even if you haven't filed your 2019 taxes yet, you MUST have the schedule C that you will use when you file (this is the list of your income and expenses for your self employment work).

I put together scans of my 1099 forms that I received, my Schedule C's (I keep a seperate Schedule C related to the cost of running this website), copies of my monthly P&L statements (Profit and Loss) from my book keeping for January and February, and bank statements showing my January and February deposits.

A note about documentation

If you are applying and you are NOT asked for your Schedule C, I recommend you stop the process and make sure you're in the right place.

I had someone tell me that they got all the way through the process and they were funded without having to submit their Schedule C. The loan is supposed to be based on your net earnings (amount left over after expenses) but his loan was funded based on the total of his 1099 forms. He was worried about being in trouble for getting the wrong amount.

I'm not sure where the error would have happened. More than likely it came down to confusing instructions. We were both surprised that the SBA approved it without the right information, but I think it's because they're just pushing through so many applications that they don't have the time to examine all the documentation. My guess is that in the process of reporting things in the time to come, they'll figure out that the wrong amount was lent. More than likely the extra will have to be repaid, but I don't know if they'll want that back immediately or just make him make monthly payments.

The whole point of this is, if you're not at a point somewhere that you have to get your Schedule C or have to enter Schedule C's line 31 anywhere on the application, you are probably in the wrong place. My best advice is to stop and contact someone at the institution to help you through the process.

The application itself was easy.

There was not much information that I had to enter. I had to enter my personal information (this time including my social security number – which is why it's important that you verify you're legitimately on the site belonging to the lender). They had me check off several things, including acknowledging that I was in business as of February 15 and that my business was impacted by the pandemic. They then asked me to provide the number on Line 31 on my Schedule C.

It's that number that determines how much you can borrow. That number is your business profit – the money you pay your taxes on as a business. In other words, money we receive from Grubhub, Doordash, etc, MINUS our miles and other expenses. They then divide your total earnings by 12 to get your average monthly amount. (Note, even if you only worked a few months, they still divide by 12).

So, say you had $24,000 in taxable earnings. They divide by 12 and get $2,000 as your monthly average. Then they multiply that by 2.5 ($5,000) to get the amount you can borrow.

And then it's just a matter of uploading documents.

And then it was just electronically sign the application….. and wait.

Honestly, it took me more time to get the documentation together than it took to fill out the application.

Within 12 hours, I received an email that my loan was approved.

It was that easy.

It's not completely done yet. I had to set up my bank account information for the deposit, and the verification process took a couple days. Right now I'm waiting for Kabbage to send over the loan documents so I can sign. That's where I am right now.

What will I do with the funds?

My intent is to use them for what they are intended for: to make up for any loss of income that I might be experiencing due to this pandemic. I'll put the money aside, and if I'm not able to earn what I normally earn, I'll pay myself the difference out of those funds.

How much will I have to repay?

I'm going to assume I'll have to pay all of it. To me, it just makes sense to plan on that. I'm looking at this as a loan that will act as a backup. That's my understanding of what it's intended to be. And I'll treat it as a LOAN, not as free money.

I still don't have any clear information as to how they'll calculate how much is forgivable for independent contractors. Loan forgiveness is based on how much of the loans you use for payroll (if you have employees) or owner income replacement (if you are a sole proprietor without employees). Payroll is easy to document. But what are they using to determine exactly what was owner income replacement?

I am pretty sure that I'll have to repay AT LEAST a fourth of the money. That's because the government has stated that “forgiveness of such amounts (is) limited to eight weeks’ worth (8/52) of 2019 net profit” (from the government's guidance on the SBA loans for self employed individuals) In other words, we're borrowing based on just under 11 weeks (2.5 months) of net profit, but the most that can be forgiven is 8 weeks.

Because there's no specific information, I'm not going to bank on any of this loan being forgiven. If it is, awesome. If not, then I'll either just pay it back right away or get on the payment plan.

Update: In November 2020, I went through the loan forgiveness process. 100% of my loan was forgiven. When the legislations was written, it originally stated that only eight weeks worth would be forgiven. However, the act was later updated that expanded what can be forgiven for self employed independent contractors.

What happens next?

Of course, for me part of it is waiting for the final processing. Nothing's done until the money's in the bank.

But then, the next 8 weeks are critical. It's what happens in the next 8 weeks that determines what, if any, of the loan will be forgiven. My understanding is that eight weeks after I receive the loan, I can ask to have the loan forgiven.

When asking for the forgiveness, I'm pretty sure I'll have to send them documentation of what has happened in those eight weeks. I'll need bank records for what money was received by each of the gig apps. I'll need record of my expenses – mileage and any other expenses like my cell phone etc. I may have to keep a record of how the money itself was spent. I'll submit all of that and then see what they say I have to pay back.

And I'll keep you informed. Whether I just append the information to this article or post a new article, I'm not sure.

My impression so far:

I was pleasantly surprised at how easy it was to apply. I was especially surprised how quickly the approval was sent to me.

My only frustration so far has been the delay in getting my bank account verified. I can't blame that on Kabbage or Womply. What happens in this particular case is that they send a couple of micro deposits to my bank, and then I have to confirm how much was deposited. The delay is in how much time it took for those deposits to show up, but I think that had more to do with my own bank than it did with Kabbage.

So far, based on the process and my experience, I have no hesitation in recommending it to anyone else. I don't know what to expect going forward – I'm not sure anyone does. But I'll be sure to let you know what I do learn as it happens.

Update.

As of Monday morning, as I was wrapping this up, I had confirmed my bank account and was advised that they would be reviewing documents. Tuesday late afternoon, I finally received notice that the documents were ready to sign. It was a few minutes to read through the loan application and e-sign the loan. Now it's just a matter of waiting for the deposit to be completed. Considering the micro-deposit process took about two business days to show up, I'm expecting the same for the actual deposit.

I'll admit I was starting to get nervous. I mentioned the referral program – referrals only get paid out if the loan amount is $20,000 or more. I was nowhere near close to that. Nowhere near. That made me wonder if there would be a longer delay, because I'm guessing banks get paid more to process larger loans (because at 1% interest they sure don't get paid much for the loan itself).

Final update

Two days after this last update, the money arrived in my bank. It took just under a week from the moment I applied to the time the money hit the bank. Most of the waiting was related to processing time for ACH or direct deposits. I had to confirm micro deposits from Kabbage to confirm my bank account before they'd release it, and then like any direct deposit it just takes a couple of days for it to be available.

Overall, it was a much easier application process than I would have expected.

Now the question remains: How much of this will I have to pay back?

Update to the final update: In my situation, the loan was fully forgiven as of late November, 2020.