Most companies should be able to qualify for the Paycheck Protection Program. If your business is based in the U.S., has 500 employees or less, and if your market is financially affected by COVID-19, you should be eligible for the PPP loan. While the PPP is meant for all small businesses—from sole proprietors to C corporations—some restrictions and requirements may ultimately invalidate you.

General disqualifiers

If any of these statements apply to your company, you are not eligible for the PPP.

• You were not in service on or before February 15
• You employ household employees such as nannies or housekeepers
• An owner of 20% or more is involved in the justice system (incarcerated, on probation or parole) or has been convicted of a felony within the last five years
• You, or any business owned or controlled by you or any of your owners, is delinquent or has defaulted on a loan from the SBA or any other Federal agency within the last seven years
• You or your business are bankrupt or currently in bankruptcy proceedings
• You are an officer or key employee of the lender you are applying with, or a close relative of one. You may apply for the PPP with an unaffiliated lender
• Your business is a hedge fund or private equity firm
• You do business in an industry that is generally not eligible for SBA 7(a) loans, such as speculation or multi-sales distribution

Independent contractors

To apply for the PPP, you will need a tax-ready 2019 Schedule C from your personal Form 1040 tax return. While it does not have to be filed, it must be complete and accurate, so you will need all your 1099-MISC forms handy to complete your Schedule C.

You must have reported a net profit on your Schedule C in 2019. If you do not have a 2019 Schedule C because your business was not in operation in 2019, further guidance is pending from the Treasury.

Sole proprietorships and Single-Member LLCs

You will need a 2019 Schedule C from your personal tax return. While it does not have to be filed, it must be complete and accurate. You must have reported a net profit on your Schedule C in 2019. If you also have employees on payroll, you do not need a net profit, but you must have payroll tax forms 940 and 941/944 for 2019.

Partnerships

Individuals should not submit separate applications, but only submit one PPP application on behalf of the partnership. If you also have employees on payroll, you should have payroll tax forms 940 and 941/944 for 2019. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

S corporations

Only S corps who have payroll are eligible for the PPP. If you were only paid through owner draws or distributions and did not pay payroll tax, you have no payroll costs to report and the PPP is not suitable for you.

If you also have employees on payroll, you should have payroll tax forms 940 and 941/944 for 2019. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

C corporations

Only C corps who have payroll are eligible for the PPP. If you were only paid through owner’s draws or distributions and did not pay payroll tax, you have no payroll costs to report and the PPP is not suitable for you.

If you also have employees on payroll, you should have payroll tax forms 940 and 941/944 for 2019. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

Nonprofits

You will need to have run payroll in 2019 to qualify for the PPP. Faith-based organizations should also consult the SBA’s guidance on eligibility.

How to apply for the PPP

To apply for your PPP loan, you’ll need to apply through a lender who is participating in the PPP program.

You can find an official list of PPP lenders here.

We recommend starting with neighborhood bank and credit unions, as they will be the ablest to serve small businesses. It doesn’t hurt to apply through more than one lender. Once you’re approved for a loan, the SBA will automatically reject your second application.

Further reading: Documents Required for the PPP Application

The employee retention tax credit

You can be eligible for payroll tax credits if you keep your employees on the payroll, if you paid COVID-19-related sick leave for employees, or if you had to suspend operations.

Further reading: Employee Retention Credits: A Simple Guide (COVID-19)

The Express Bridge Loan

You can borrow up to $25,000 for disaster-related purposes from a lender you have an existing banking relationship with.

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