How to Apply for Paycheck Protection Program PPP Step by Step for Independent Contractors

Don't be one of the vast majority of gig workers who fail to get funded through the PPP because they didn't do things right. I've seen numbers reporting less than five percent of independent contractors were getting funds through the Paycheck Protection Program.

Were they being discriminated against? Are independent contractors for gigs like Doordash, Uber Eats, Instacart, Grubhub, Lyft, Postmates and all those others really not supposed to receive funding?

No discrimination here. For the most part, most contractors just didn't do it right.

If you know how to apply and you treat this like a business application, you have a much higher probability of getting funds through the Paycheck Protection Program (PPP) as an independent contractor.

Here are some step by step tips to help you with your application.

1. Determine if you qualify

Understand the qualifications. Don't be scared away by myths or doubts. But also understand the things that could disqualify you.

The biggest myth? That you have to have people on payroll to qualify for the Paycheck Protection Program. Independent contractor for gig economy companies ARE eligible. Your profits for your business are considered your ‘payroll.' Don't be scared away by myths.

There are some common things that might disqualify you.

If you started your gig work after February 15, you won't be able to take advantage of this program. The Paycheck Protection Program was designed to help existing businesses that were hurt by this pandemic.

Understand that what you receive is based on your taxable income. In other words it's based on your Schedule C. If you didn't file or you didn't make enough money to show a profit on Line 31 of your Schedule C (edit: this has changed – see the update below), you won't receive anything. For those who drove so many miles that it comes out as zero income for taxes, it also means zero profit and zero PPP funding.

Update: The SBA announced new rules that change how PPP funding is calculated. These new PPP rules help gig economy workers by making more contractors eligible and changing the basis from Line 31 on Schedule C to Line 7. In other words, it's now based on gross revenue, not profit.

Bankruptcy and some criminal convictions may prevent you from receiving funding. If you've been involved in fraud or embezzlement, or facing imprisonment for a felony, that could get in the way.

Bench Accounting has a good article that goes into more detail on who is or isn't eligible.

2. Get your finances together.

The application is pretty quick if you have your financial information together. It will be a pain if you don't. Get your bookkeeping up to date. If you don't have bookkeeping, now's the time to start.

This is especially true if you're applying for a second draw loan. The qualifications are tighter and involve knowing your quarterly financial numbers for your business.

What's your average monthly profit? What are your quarterly gross receipts? What about your quarterly profits? Are your records in such a format that you can put together a Profit and Loss statement? Can you get quarterly reports?

I would strongly encourage you to get a bookkeeping program if you don't have one already. You're applying for a business loan. Treat this like a business.

Hurdlr has a great option for beginners. It's easy to use and set up for self employed people. I actually like it better than Quickbooks Self Employed because it's got a lot more flexibility. There's a free version that will do the basics for you, and a paid version ($48 per year with my affiliate link) that has more advanced reports and automatic mileage tracking.

Quickbooks Self Employed is a bit more widely known. Accountants and tax pros are more familiar with the program. I think there's a lot of limitations for the cost but that's just my opinion. You can start at $7.50 per month with my affiliate link.

Whatever you use, get a program, enter all of your transactions. Have it all entered by date. It's a good practice to get 2019 transactions entered into your program as well.

By the way: this will make taxes much easier.

3. Run your taxes for 2020

You need to know what you're going to be reporting for your taxes, especially your Schedule C.

This is especially true if you're applying for a second draw Paycheck Protection loan.

What if you haven't received your 1099's? If you've done step 2 and you have your bookkeeping up to date, you know what you earned.

Even if you're not going to file for a few months, know now what you'll be putting down on your Schedule C. Have that in place so that you can provide your Schedule C if needed.

If you're still reading, that probably means you were in business before the pandemic. That means you may have run taxes as an independent contractor in the past. If so, use what you've used if it worked well.

Personally, I use H&R Block. I'm not sure there's any reason, other than I've been using it for several years now. If you decide to pick up the Quickbooks Self Employed, there's a bundle that includes TurboTax.

While you're doing all this: Make sure that your quarterly numbers in your bookkeeping line up with your Schedule C, both for 2019 and 2020. Note: A lot of bookkeeping programs don't include your mileage expense in their profit and loss, while the Schedule C does. So, if they don't line up, check the math on your mileage allowance (57.5¢ per mile in 2020, 58¢ in 2019).

4. Get your documents together

When you finish applying, you'll be asked to upload supporting documents. It's good to have them ready. Here's what you need:

• Evidence or proof of Identity
• Proof of payroll or owner earnings
• Proof that you were in business in February 2020
• A voided check or direct deposit form for your bank showing the routing number and account number
• (If you are applying for a second draw loan) Proof of loss of income.

Have these documents together before starting the application. It will be much easier.

Proof of identity.

You will need to upload a picture of a valid state issued ID such as your Driver's license, or a valid passport. Have this in an uploadable form, preferably if you can scan it to a PDF. A clear picture that's readable may be accepted.

Proof of payroll or owner earnings.

For self employed independent contractors, such as with Doordash, Uber Eats, Lyft, Instacart, Grubhub etc, our potential funding is based on what we earned. Unless you've incorporated in a special way, your proof of owner earnings is your Schedule C. It's best practice to have your Schedule C for both your 2019 and 2020 tax years available.

Proof of being in business when the pandemic started

You need some form of documentation that you were in business when the pandemic started. The date the government is using is February 15, 2020.

This may vary based on the lender. In the first rounds of PPP funding, many were able to use their Schedule C and perhaps a copy of 1099 forms. There's a bit more emphasis now on documenting you were in business in February. I recommend you get as many of these together as possible:

• 2019 Schedule C
• 1099 forms from the 2019 tax year
• Bank records from February 2020 with payments from gig companies highlighted.
• Any written documentation of payments received in February 2020 e.g. emailed pay statements from Grubhub, printable monthly statements from Uber/Uber Eats, etc.

Proof of loss of income (for 2nd Draw PPP Loans)

If you received PPP funding in the past and you're applying for a second draw loan, you only qualify if you had a 25% or greater loss of income for any quarter of 2020. You can use this tool

On larger loans, the SBA is asking for documentation up front. For smaller loans, they are more likely to ask for that when you apply for forgiveness. At some point though, you need that documentation.

What will they ask for? They've identified that for those of us who are independent contractors it may be either or all of:

• Quarterly financial statements for both 2019 and 2020. (Think Profit and Loss statement)
• Bank records that support the quarterly statements.

You can read more about how the PPP 25% reduction of income test works or use this tool to plug in your quarterly numbers and see if you qualify for the second draw of the Paycheck Protection Program.

5. Find a bank to apply with.

Applications for the Paycheck Protection Program are done through banks rather than through the SBA. I would that if you have a local bank relationship, start with them. You can check the SBA for local banks in your area. Sometimes it's good to work locally because you have someone you can ask questions of.

You can also use my referral link with Womply. Womply is a registered loan agent that has relationships with several SBA lenders. What they will do is take your information and then connect you with the lender they feel is best suited to your particular situation.

6. Begin the application.

I'm going to start with the process of going through Womply. The welcome page begins right away with identifying what type of business you are.

I really appreciate their approach. Part of the problem with a lot of these programs is it's easy to get lost in the clutter when everything is geared towards bigger businesses. Womply narrows this down by immediately determining what type of business you are so they can get you in touch with a lender that's geared towards helping smaller contractors.

Next up is some general information. This is just general information and a couple of questions that help them determine where to go next. They don't ask for more sensitive information, that's only gathered by the bank site.

Update: If you have never received the PPP before, Womply will now direct you to their new, fast easy application for PPP funding called the Fast Lane. The steps for that are slightly different but much faster.

Make sure you know that whoever you're working with is legitimate. There have been a lot of scams out there related to the pandemic relief programs.

Once you've entered the informatin here, Womply will send you over to the lender they find to be the best fit for you at the moment. Sometimes it appears that one lender might get overwhelmed and not able to take more applications for awhile.

7. At the bank site, begin filling in the loan information.

Every bank collects the information differently. So there's no one set way that everything will be done.

Ultimately what happens is they take the information you provide, then translate it into whatever the SBA is asking of them. Some do a better job of asking for things in a way that makes sense to you than others.

I'll try to walk through a few things that can trip people up.

What is your business name?

Your name is your business name. (Unless you've incorporated with some form of registered business name).

Here's what your business name is not:

It's not Grubhub. Nor is it Uber or Lyft. Your business name is not Doordash or Instacart or Postmates or any of the above.

Do NOT put down one of those companies as the business name.

This is asking for the name of the business that's getting the loan. Doordash is not getting this loan. You are.

If you have created a corporation or an LLC, enter the name you incorporated with. If you're like most independent contractors with one of these gig apps, the actual name for hte business is your name.

More information on your business

Generally, for self employed independent contractors, the business address for your Paycheck Protection Program application is going to be your home address.

If for some reason you've set up another business address, such as if you are renting an office for your business, then you might go with something else. For most self employed individuals you're going to go with the same address that you use when you file your taxes.

You'll be asked for an EIN or SSN.

Go with whatever you have registered with the gig companies. If you've created an EIN for your business and you provided that number to Doordash or Uber or any of the others, I'd expect you'd want to use the EIN here. Most of us are using our social security number here.

What was your business start date?

I would say you go with the first day you took a delivery offer or accepted a ride or performed any gig that's part of your business.

And then there's the business type.

Some banks are going to have more options. I've seen some that list Independent Contractor as an option. Others stick with just the few that are recognized by the IRS. If you haven't incorporated, “Sole proprietor” is going to be a good fit.

What is your industry code?

Here's where a lot of these banks can get confusing. Some want you to look up the number. Others want you to start typing in a description and if it matches, they'll put it there.

Too often it's impossible to enter that in. You can't type in Rideshare for example. Nothing shows up.

Here are the best codes for delivery and for rideshare that I found according to the NAICS who oversees these codes.

Delivery contractors: 492210: Local Messengers and Local Delivery.

Rideshare Drivers: 485310: Taxi Service or 485320 Limousine Service.

NAICS doesn't really specify which of the two is better, and it seems like the sources I found were split pretty evenly between Taxi or Limousine. You're not going to have a problem with either one.

How do you calculate monthly payroll if you had no payroll?

We don't have payroll. What do we put here?

If you filed taxes with a Schedule C (which is the norm for independent contractors) your “payroll” is your profit that shows up in Line 31.

If you operated at a loss or just broke even after your expenses and miles, you had no profit, which means you had no payroll.

To calculate your average monthly payroll as a self employed contractor with gig companies like Doordash, Uber Eats, Instacart Grubhub etc, it's very simple:

Divide Line 31 from your 2019 Schedule C by 12.

Update: The Biden administration updated rules in March 2021 to allow independent contractors to increase their funding. As part of these changes, funding is now based on Line 7 (gross receipts) instead of Line 31 (net profit).

What if you started the middle of the year in 2019? Or worse, if you started in 2020 but before February 15?

The SBA gave you some wiggle room in the latest guidance. Here are the steps.

1. Add up Line 31 from your 2019 Schedule C and Line 31 from your 2020 Schedule C:
2. How many months passed from when your start date until December 31, 2020? Count a whole month for the first month.
3. Divide #1 by #2.

Here's an example:

• You started September 15, 2019
• Line 31 on your 2019 Schedule C is $8,000
• Line 31 on your 2020 Schedule C is $20,000
• That adds up to $28,000
• You worked 16 months (4 in 2019, 12 in 2020)
• $28,000 divided by 16 is $1,750

What's the loan amount?

Most banks are going to calculate this for you, but if they don't, the loan amount can be up to 2.5 times your monthly average.

In our example above of $1,750 per month, 2.5 times that is $4,375.

If you made $12,000 on your 2019 Schedule C, Line 31 and had been in business the full year, your monthly average income is $1,000 and the loan amount is $2,500.

8. (For second draw applications) Answer questions about economic loss.

You will need to provide information that demonstrates that you had more than a 25% loss for at least one quarter.

Here's where things shift a little. You're going to be asked about changes in “gross revenue.” Even though the loan is based on profit, the eligibility is based on gross revenue.

For most of us in the gig economy, gross revenue is simply the fares, fees, bonuses and tips you receive for your delivery work. It's the money before expenses. If you sell items, gross revenue is your sales minus cost of goods sold. You can get more detail from question 1 of this guidance from the SBA

Each bank will ask different things. You may be asked to list your income for every single quarter of both 2019 and 2020. Or you may be asked something like this:

In this example, it simply asks if you had a loss in 2020. Then it asks which quarter had the biggest decline in revenue. I don't have a screenshot, but it follows up asking for the quarterly revenue for that quarter in both 2019 and 2020.

This is why step 2 and 3 are so important. Also a good reason to have your quarterly profit and loss printed out. It makes it a lot easier to come up with the answers to these questions.

Also make sure your books and your Schedule C line up. You can expect the banks and/or the SBA to do the math themselves.

Update: After this article was written, Womply created what they call their Fast Lane application. The application streamlines things some and did not ask this question of 2nd draw applicants. More recently (May, 2021) PPP loan fraud cases have been nearly out of control, perhaps in part because of the relaxation of application requirements.

9. Submit and upload documents.

Once you've answered all the questions, hit the submit. They'll have you go through some sort of e-signature process.

And then they'll ask for your documents.

Each bank may ask for different things but they'll usually be some variation of the things listed in number 4.

This part is absolutely critical. You won't get funded without the right documents.

10. Monitor your Inbox

One of three things will happen and they'll all most likely happen by email. (Unless of course you've done it through one of those rare local banks who still believe in the personal touch – then you may get a phone call instead).

• You'll get notice of approval
• You'll be told you were denied or ineligible (usually with instructions on if there are any options)
• They'll want more documentation or improved documentation. The request will be pretty specific.

That's about it.

There are a lot of applications happening right now. It might take a few days to get a response of any kind.

If you receive an approval you'll get instructions on how to agree to and sign your loan. Then it just takes a few days. Then when the time comes, they'll start instructing you how to apply for loan forgiveness.

Will you get funded?

In the end, I can't guarantee that anyone will get the loan. Either you qualify or you don't. I do know that a smaller number of gig workers get funded than just about anyone else, and most of it is because they're just sloppy about their application.

Dot your i's. Cross your t's and then for good measure dot the t's and cross the i's. Do it right. Don't rush through the process. Take the time. Follow the steps. Get someone to help you if you need it. It's worth the time for the forgivable funds that come in.

This is a business program. Treat it like one and you're much more likely to succeed with it.