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CARES Act Paycheck Protection Loans For Indies

You are eligible to receive a government bailout!

Fellow indies, whether you are self-employed, independent contractors, or sole proprietors: this could be your salvation. The CARES act, passed into law as H.R.748, specifically makes the new paycheck protection loans available for “eligible self-employed individuals,” meaning anyone who works in a trade or business and who is not the employee of another employer, as defined in the IRS code section 1402. These loans are available for up to 2.5 times your average monthly net income as an independent contractor, and any amount used to pay yourself that doesn’t bring your annualized income based on the rate of pay over $100,000 will be completely forgiven if you provide the lender appropriate documentation.

Get your documentation ready!

You have 3 options for periods you can use as the basis for the amount of loan you’re applying for:

  1. If you’ve been in continuous business since February 19, 2019, congratulations! And also, you can use your monthly average net income from the period of 1 year prior to applying for this loan as the basis.
  2. If your business could be considered seasonal, you can use February 19 through April 14th, or March 19th through June 30th, of 2019, as your basis – whichever period is more favorable to you.
  3. If you weren’t in business continuously from February 19, 2019, having at least a full month without self-employment income, you may instead use your net income from January and February 2020.


You will need to provide the following documentation, so gather these before applying:

  1. Tax forms such as 1099-MISC showing your self-employed status.
  2. Financial disclosure such as bank statements showing the covered income.
    1. If you are using a January/February “new business” basis and have outstanding unpaid invoices from that period, include those: they count as payroll obligations for that period.


Where and How to Apply?

You will need to go through a government-guaranteed lender. For best results, you can contact them with the help of an SBDC (Small Business Development Center). (Use these links to find the relevant entities.) The SBA has a sample form that lists what you need to provide the lender in order to apply. The SBDC should be able to review the documentation you’ve prepared and let you know if it’s correct — and it’s their job to help you get access to this money.

What happens next?

You should get a response not more than 15 days after submitting your application. If you went through an SBDC and they verified that your application documentation was correct, you can confidently expect to receive your paycheck protection loan. The federal government is backing these loans 100%, and paying an extra amount on top to the institutions which service them, so they have an incentive to grant the loans. For loans less than $350,000, which all self-employed instances will be, that means the lender is guaranteed to receive 105% of what they gave you back from the federal reserve.


If you need the money sooner, you can apply for an “Emergency EIDL Grant” directly through the SBA. Good for up to $10,000 advanced as a grant, this amount will be subtracted from the amount you can be forgiven for if you are granted the loan – it’s an advance as a grant, not an extra amount on top. It may be used for roughly the same purposes as a PPP loan: mortgage or rent payments, payroll, sick leave pay, etc. So include it on your tax form just like the other replaced income you report when getting forgiveness for the rest below. If you do get the loan approved, don’t worry about the extra amount – PPP loans have no early repayment penalty.

That’s it, you’re paid!

You do have one further obligation to ensure the loan is forgiven: providing documentation that the loan proceeds were used for a covered purpose. Luckily, paying yourself is, in this case, a covered purpose. It can also include interest on a mortgage, rent obligations, and utilities payments, but unless you are close to the ~$2000/week limit during the 10-week period after the loan is approved, it’s simpler to simply document that it is all used for your payroll of one self-employed individual, yourself. Since you would normally document income from your contracted clients using the 1099 forms they are supposed to give you, you would in this case fill out a 1099-MISC form documenting this amount paid to yourself. If you have an LLC or other pass-through taxation entity, or a “Doing Business As” name, you can use that entity name as the entity paying you. If you do not have an EIN from the IRS, you will need to apply for one to fill out this form properly.


Despite coming in the form of a loan, the amounts given out on the paycheck protection program are not expected to be paid back, ever. The CARES Act specifically gives the lender no legal recourse against you, and if you provide documentation of use for payroll costs, must hold you harmless and may not initiate any kind of enforcement action against you. This is income replacement for gig workers, who are presumed to be impacted negatively by the COVID-19 outbreak.

Confused? Need help?

We at Growthlaw can consult with you and assist with your application. We can verify your documentation and put you in contact with your local SBDC and guaranteed lenders — and advocate for you with the lender if your application encounters trouble. Please contact us, and we can help you set up your loan for no charge to you.

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