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Paycheck Protection Program (PPP) SBA Loans for Grubhub, Doordash, Uber Eats, Postmates, Lyft Independent Contractors and Drivers

Quick Reference: Tax and PPP help.

Do Independent Contractors for Grubhub, Doordash ,Uber Eats, Lyft, Postmates, etc. Qualify for the Paycheck Protection Program (PPP) SBA Loans?

It's not often you think of SBA Loans as an independent contractor for gig economy apps like Grubhub, Doordash, Uber Eats, Postmates, Lyft and others.

The Coronavirus has changed everything, hasn't it? You can include aid such as the Paycheck Protection Program (PPP) in that list of things you wouldn't have expected a gig worker could apply for.

Independent Contractors for Grubhub Doordash Postmates Uber Eats and others may be eligible for the Paycheck Protection Program SBA Loans
Independent Contractors for Grubhub Doordash Postmates Uber Eats and others may be eligible for the Paycheck Protection Program SBA Loans

As part of the CARES Act, the paycheck protection program was created to help small businesses stay afloat and keep their employees.

The loan can be taken for up to 2-1/2 times the average monthly payroll costs and can be forgiven if used to cover payroll.

Related – Update December 2020:
Congressional leaders have reached agreement on an updated stimulus package including an extension and renewal of the Paycheck Protection Program. Those who received funding may qualify for a second draw, depending on if there was a loss of income for 2020. You can apply here for the Paycheck Protection Program.

But we don't have employees. We don't do paychecks. How does this work?

The CARES act did make self employed individuals and independent contractors eligible for the loan. And in fact the loans can be forgiven.

How much can an independent contracor for Grubhub, Lyft, Uber Eats, Postmates, Doordash or other gig companies apply for with the SBA Paycheck Protection Program (PPP) Loans?

You can apply for up to 2 and a half times your average monthly income.

But here's the thing you have to understand: Your income is NOT the money you receive from these gig apps. This is based on taxable income: your profits.

If you've been receiving $5,000 a month from Uber Eats, Lyft, Postmates, Grubhub, Doordash and others, that does not mean you can apply for $12,500.

In the government's eyes, your income is your TAXABLE income. It's based on your profit – the amount left over after whatever expenses you claimed.

If you claimed so many miles on your taxes that your reported profit on your taxes was $0, well, do the math. $0 x 2.5 = $0.

If your self employed profit was $24,000 for the year, your average monthly income would be $2,000. That means you'd be eligible for $5,000.

How do you determine your monthly self employed income for the Paycheck Protection Program SBA Loan?

Picture of calculator, pen, and notepad for calculating eligibility for the paycheck protection program
The math is a bit weird when it comes to calculating eligibility for the paycheck protection program loans

Your self employed income is based on your Schedule C that you filed with your income taxes.

Schedule C is where you list all of the money that you received from the different gig economy apps. It's also where you list all of your business expenses. The total at the bottom of the Schedule C is your profit – how much is left over after your expenses.

That profit is what your self employment tax is based on. It's also added to other income to determine your income tax.

Line 31 on Schedule C is where you find this important number. That's the line that's labeled “Net Profit or Loss.”

You now need to calculate your average monthly income. Take your 2019 Schedule C line 31 and divide by 12. That's your average monthly income. Multiply that by 2.5 and that's the amount you can apply for.

What if I haven't filed my taxes yet?

The filing deadline for taxes was extended beyond April 15 due to the impact of the pandemic. Independent contractors are often more likely to have delayed filing because they are still likely to have owed money.

part of the puzzle for paycheck protection program is schedule c

If you have not filed yet, you still have to have to submit a Schedule C. In other words, you have to submit the Schedule C that you WILL file. If you don't have that yet, you need to get that put together.

I started contracting in the middle of the year. Do I still divide my income by 12?

Everything that I see indicates you still have to divide by 12.

For example, if you started July 1 and your net profit on your Schedule C was $12,000, your true average monthly profit was $2,000. However, for purposes of calculating average monthly income for the loan, it looks like you still have to divide by 12. In other words, you can only apply for $2500 ($1,000 x 2.5).

There is a provision that a new business can choose to use the monthly average from the first two months of 2020 as a basis. However, according to this FAQ that was forwarded to me by Womply.com,

“Finally, although the Act makes businesses in operation on February 15, 2020 eligible for PPP loans, the Administrator, in consultation with the Secretary, has determined that self-employed individuals will need to rely on their 2019 Form 1040 Schedule C, which provides verifiable documentation on expenses between January 1, 2019 and December 31, 2019. For individuals with income from self-employment from 2019 for which they have filed or will file a 2019 Form 1040 Schedule C, expenses incurred between January 1, 2020 and February 14, 2020 may not be considered because of the lack of verifiable documentation on expenses in this period.”

FAQ from Womply re: Paycheck Protection Program

In other words, you have to be able to back it up. The SBA has determined that it's difficult if not impossible to verify the numbers from earlier this year. They see your Schedule C as more reliable because it's an actual tax form you will be filing.

Is the Paycheck Protection Program SBA Loan Forgivable for Independent Contractors with Grubhub, Uber Eats, Doordash, Lyft, Postmates and others?

Technically, it is.

Remember, this is a loan. If you don't take the steps required, the full amount will have to be repaid. It will have an extremely low interest rate.

There are provisions in the loan where it can be forgiven.

If you have employees, your loan forgiveness eligibility is tied to how much you actually pay your employees.

As a self employed person, your loan forgiveness is simply tied to “owner compensation.” Rather than rely on payroll records, you base your forgiveness on “with forgiveness of such amounts limited to eight weeks’ worth (8/52) of 2019 net profit.”

Post it note on a bulletin board with the words PPP Loan Forgiveness

If I'm doing my math right, that means some will still have to be repaid. Let's use the person who earned $24,000 as an example. That person qualifies for a $5,000 loan.

However, 8/52 of that person's earnings is just under $3,700. By my understanding, that means $3,700 of the $5,000 COULD be forgivable.

Note: Later updates by the government have allowed forgiveness to be based on the full 2.5 months for self employed individuals, making the loan fully forgivable.

Everything I'm reading says it is forgivable, if used to replace owner compensation. In other words it looks like it if replaces lost income, you can get the loan forgiven.

You do have to apply for forgiveness with your lender. I'm still looking for information on what kind of documentation you would need as a self employed individual.

One question I've not been able to find an answer for so far is, are you only able to get the difference between your usual earnings and what you actually earned forgiven? Those details are kind of nebulous.

Update: Over time and with clarifications, it turns out that it was not necessary to document that earnings were lost in order to receive the funding.

Related: My experience applying for SBA PPP Loan As a full time gig economy courier I was approved within hours and funded within days.

Where can an Independent Contractor with Doordash, Uber Eats, Grubhub, Postmates, Lyft, etc. get more information about the SBA Paycheck Protection Program (PPP) Loan?

I've found a lot of information out there, most which says the same thing. Generally they're putting out the wording and the language put out by the Small Business Administration.

The best assembly of information that I've seen out there, especially for self employed individuals, was assembled by Womply.com (I mentioned one of their FAQ's above).

Womply provides business software, generally for other types of businesses. I've been incredibly impressed with the depth and quality of their information.

Womply also has a portal where you can apply for a Paycheck Protection Program loan and they'll get you in touch with lenders.

Update: The deadlines have passed for the original rounds of funding. However, in December 2020 congressional leaders have approved a new stimulus. At that time the portal will be available again, and I'll have a link for the renewed portal.

Here's a list of articles if you want to dig further into the program:

How does an Independent Contractor for Uber Eats, Lyft, Grubhub, Doordash, Postmates, etc. apply for the SBA Paycheck Protection Program (PPP) Loan?

Paycheck Protection Program Loan application wit a pen and calculator stamped as "approved"

You can apply through any SBA approved lender. If you have a good relationship with your bank, I suggest you start with them.

If you are looking for a good place to apply, Womply (who put together all the information I listed above) serves as a facilitator putting self employed individuals together with SBA approved lenders. Here are some things you want to make sure you have in order in order to apply.

1. Make sure you're eligible.

There are certain criteria you have to meet to qualify. (Note: criteria may change for the renewed funding available as of December 2020)

  • You need to have been operating as a contractor prior to February 15, 2020. I should note that technically, if you started contracting between January 1 and February 15 of this year, you may qualify. However, in light of the SBA's guidance that they will not accept January/February numbers for self employed individuals when calculating the loan amount, you may not be able to gain approval based on a lack of documentation. If you started contracting in 2019 or earlier, you should qualify.
  • You must live in the United States.
  • As an independent contractor, you must have had a net profit for 2019. See the explanation earlier in the article about how it is based on profit. If your claimed expenses were greater than your revenue, you would not qualify.
  • You will need to have a Schedule C for 2019, even if you haven't filed yet. (Note, you want to make sure that what you submit with your application matches what you file in your taxes).

2. Get your documentation together.

You will want to have documentation together that supports your eligibility for the program. You will have to document your income and net profit for 2019, and you will need to document that you were operating your business still as of February 15.

Documentation of 2019 income:

  • 2019 Schedule C. This is required, even if you have not filed your 2019 return yet due to the filing extension. You will need to finalize that and submit the Schedule C that you WILL be filing.
  • Any of your 1099's from your delivery partners
  • Absent 1099 data, bank statements or invoices showing you are self employed.

Documentation of your 2015 operations: You will need some form of documentation that you were operating as of February 15. I would recommend screenshots from your earnings summaries on the different apps, bank statements showing your deposits, and a monthly profit and loss statement for January and February (a summary of the monthly income and list of your expenses).

3. Apply

(Note that deadlines passed in August for funding for the original round of loans. We'll update this page when links become available for the December 2020 stimulus.)

When the Paycheck Protection Program was initially introduced, self employed individuals were not able to apply until April 10. By April 15, funds had run out.

On April 23, President Trump signed a measure that provided additional money for the program, and applications were re-opened on April 27. There were some glitches in the program and a lot of the applications were delayed until the 28th.

It is not known how long the additional funds will be available. A lot of banks are overwhelmed by applications, and that can delay things. If you are planning to apply, you should do so sooner rather than later.

Update: On December 27, 2020, a new stimulus package was passed into law and included a renewal of the Paycheck Protection Program. If you did not receive funding previously, you may apply. If you did receive funding and had enough of a loss of income in 2020, you may apply for a second draw. You can apply in either case through our referral partner, Womply. Womply is a verified agent that can connect you with a lending agent that can process your application.

What should you do with the loan proceeds if you are approved?

Scale for Paycheck Protection Loan funds, balancing "Spend Now" or "Save for Later"

Remember that this is a loan. Also remember that the information about loan forgiveness isn't as complete as I would like.

If you do take this loan, I highly recommend that you treat it as a loan you have to repay until you have confirmation on what (if any) has been forgiven.

The idea of this is that it is for relief for independent contractors who are impacted by the virus. It is not meant to be a windfall or free money. Funds are limited here, so taking the money if it's not needed may take away the ability of those who do need it more.

My recommendation is to treat it exactly as it is meant to be, as income replacement. If you are unable to deliver or do not feel safe to deliver, this can fill a gap.

If you are one of those who have reduced income due to restaurants closing or over-saturation of drivers, this can be a good way to make up that loss.

My warning is, until you know 100% otherwise, you should assume that you will have to pay this back. Do not treat it as free money.

Should an independent contractor with Doordash, Grubhub, Uber Eats, Lyft, Postmates, etc. apply for the Paycheck Protection Program (PPP) SBA Loan?

If you are seeing a drop in income as a result of this pandemic, it is something to think about.

I had a couple of emails from people regarding unemployment. They were at risk and decided to stay home. Things have been delayed in their unemployment applications and they weren't sure if they would qualify.

At this point, when bills need to be paid, even a loan helps at least get through.

So far I haven't found definitive word on if you can take both the PPP AND the Pandemic Unemployment Assistance (PUA). To me it looks like double dipping, and my suspicion is you have to choose one.

For some, unemployment is going to pay better. The loan may actually be less red tape. In the end, I can't tell you which is better, that's a decision you have to make.

I'm glad the programs are available for the many who need them. For many, this can provide welcome relief. If you apply, just understand that there's no guarantee of acceptance, and no guarantee that it won't have to all be paid back.

If this helps you, by all means, apply. Just do so carefully.

Could this help someone else? Please share it.

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Garrett Allain

Wednesday 24th of June 2020

I've been weary to take it. I got approved for ~$6500, but unemployment has already paid me ~$15,000. The answer was clearly unemployment for me. However, with the extra $600/month PUA running out next month, I'll be up shits creak with only $450/week. That's only enough to cover my rent. No food and bills will start piling up. I was doing Uber full time when this all started, and I'm concerned that all drivers will be back come August 1st, with much less demand. I could usually do $200/day, but I'm going to guess we will be lucky to hit $100/day since demand is so low + influx of Uber drivers back on the road. I may end up considering the PPP loan if it's still available around that time.

ronald.l.walter

Wednesday 24th of June 2020

I've heard of some thinking of using this for when the extra unemployment runs out. The last I knew, the deadline for PPP is June 30.

I know right now that's one of the sticking points in the next stimulus package, whether to expand that additional unemployment. I have a feeling it might be expanded but not at the full $600. But until it's approved I sure wouldn't want to make decisions based on what might happen. But that leaves people in a bind when you're thinking about doing PPP which probably means going off unemployment, and what happens if that money runs out and you can't get back on unemployment?

Dube

Saturday 9th of May 2020

Is payment on car loan considered as an eligible expense for PPP loan forgiveness? I am asking because I am driving with uber/ Lyft using this car.

ronald.l.walter

Saturday 9th of May 2020

Here's how I understand it. You have to use 75% for payroll (or in the event of an independent contractor, owner income replacement) to qualify for loan forgiveness. Up to 25% can go towards operational costs as long as you've claimed that expense in your previous tax year. If you claimed your loan interest last year you might be able to use 25% for that - and possibly just by claiming miles, maybe you can still claim 25% for your vehicle. I say maybe and might because I don't know for sure - all the details for self employed haven't been spelled out yet to my knowledge

The problem is that for those of us who are self employed, they haven't defined exactly how the loan forgiveness works and how you document whatever that owner income replacement is. Personally, I'm treating it like I'm assuming none of it will be forgiven, but I'm tracking everything I do just in case. As soon as I hear anything more specific about how that will work I'll definitely be posting.

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