In light of the global pandemic, many businesses have been struggling to stay afloat financially. The Paycheck Protection Program (PPP) loan was developed by the US Small Business Administration (SBA) to help businesses with the financial burden of the COVID-19 pandemic. The loan provides funding to small businesses to help them cover payroll costs, rent, mortgage interest, and utilities. Additionally, the PPP loan can now be used to cover payments to independent contractors.
Independent contractors are self-employed individuals who work for a business on a contract basis. They are not considered employees of the business, and as such, they are not included in the company`s payroll. However, they have been included in the PPP loan program since the program was first rolled out in April 2020.
Before applying for the loan, businesses should determine the maximum amount they can borrow using the PPP loan calculator on the SBA website. The maximum loan amount is generally 2.5 times the business`s average monthly payroll cost, up to a maximum of $10 million.
To qualify for the loan, businesses must have been operational as of February 15, 2020, and must have fewer than 500 employees. The loan is forgivable if the funds are used for eligible expenses, such as payroll costs, rent, mortgage interest, and utilities, within 24 weeks of receiving the loan.
For businesses with independent contractors, the loan can now be used to make payments to the contractors. The SBA has set the maximum loan amount at $100,000 per individual contractor. Payments to contractors can be included in the loan forgiveness calculations if the contractor`s payments are made during the covered period and are for services that were performed before February 15, 2020.
Businesses that are interested in applying for the PPP loan should contact their bank or financial institution to start the process. The application deadline for PPP loans has recently been extended to August 8, 2020.
In summary, the PPP loan is a valuable resource for small businesses struggling with the financial impact of the pandemic. The loan can now be used to cover payments to independent contractors, and businesses should take advantage of this opportunity if they need the financial support. The SBA website provides a wealth of information on the loan program, and businesses should consult with their bank or financial institution before applying.