Sherman Lusinsky

If the following statements apply to your business, you are eligible to apply for your first PPP loan in 2021.

If the following statements apply to your business, you are eligible to apply for your second PPP loan in 2021.

A 25% or greater reduction can be shown in one of two ways:

For example, if a business wants to use the second quarter (Q2) of 2019 where they recorded $20,000 in gross revenue, they are eligible if they recorded a gross revenue of $15,000 or less in Q2 2020.

Further reading: How to Calculate a 25% Reduction in Revenue for PPP 2

If any of the following statements apply to your business, you are not eligible for any PPP loan.

If the PPP loan application for independent contractors is unchanged for 2021, you will need a tax-ready 2019 or 2020 Schedule C from your personal Form 1040 tax return. While it does not have to be filed, it must be complete and accurate. You will need all your 1099-MISC forms (which are 1099-NEC forms in 2020) handy in order to complete your Schedule C.

You must have reported a net profit on your Schedule C in 2019 or 2020.

Further reading: Self-Employment, 1099s, and the Paycheck Protection Program

If the PPP loan application process for sole proprietors is unchanged for 2021, you will need a tax-ready 2019 or 2020 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 or 2020.

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 or 2020.

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 or 2020. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

PPP loans also provide coverage for the partners that can’t take a salary. You can include their self-employment earnings as reported on their Schedule K-1 capped at $100,000 and multiplied by 0.925

Further reading: PPP Loans for Partnerships: What You Need to Know

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 or 2020. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

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 or 2020. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

You will need to have run payroll in 2019 or 2020 to qualify for the PPP. Faith-based organizations should also consult the SBA’s guidance on eligibility.

On January 6, 2021, the SBA released two sets of guidance: one for first draw PPP loans and another for second draw PPP loans.

PPP loan applications for both first and second time borrowers are open now.

Check in with your lender for information on how to submit an application with them.

Further reading:

There are lots of other funding options out there! You can check out some of your options below.

A final note: all businesses are unique and it’s possible that this article did not fully cover your situation. If your situation is more complicated, a consultation with a CPA or your lender is highly recommended.

If you don’t qualify for the PPP but still need cash flow to keep your operations going, here are resources we recommend looking into.

You can be eligible for payroll tax credits if you keep your employees on 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 federal government is providing up to $600 to eligible individuals. You can check the status of your payment at the IRS Get My Payment site.

Self-employed individuals and independent contractors are eligible for unemployment benefits if they find themselves unemployed, partially unemployed, or unable to work due to COVID-19. Visit your state’s Department of Labor site to apply.

Further reading: Unemployment Benefits and the CARES Act

Banks, merchant processors, and other private lenders may offer lines of credit or other lending options. But the terms won’t be as favorable as the PPP and EIDL. Note: some of the below offers may have been changed due to COVID-19.

We’ve compiled our recommendation of the best bank loans for small businesses in 2021.

A line of credit is more flexible than a bank loan, and usually cheaper too. Here’s our recommendations of the best business lines of credit in 2021.

Using a credit card to float your business is usually a bad idea. However, some business credit cards offer 0% interest for the first year. Check out our recommendations for the top business credit cards to see if any fit your needs.

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