UPDATE: As of April 24, 2020, the federal government approved replenishment funding for the PPP by way of the Paycheck Protection Program and Health Care Enhancement Act. Learn more.


The Small Business Administration (SBA) has released much-anticipated guidance for self-employed individuals and independent contractors (self-employed individuals) that are applying for a Paycheck Protection Program (PPP) loan. This new guidance includes additional restrictions and new documentation requirements for self-employed individuals applying for a PPP loan.

Who is Eligible?

The new guidance generally pertains to individuals who have filed or will file a 2019 Form 1040, Schedule C. This guidance does not cover self-employed individuals that started a new business in 2020. The SBA will issue separate guidance for these start-up businesses/self-employed individuals. The guidance also does not cover individuals who are partners receiving guaranteed payments or self-employment income from partnerships. These individuals cannot apply for a separate PPP loan. Instead, the partnership must file for a PPP loan on behalf of the partners earning/receiving self-employment income or guaranteed payments.

Maximum PPP Loan Amount 

Your compensation is considered by the SBA to be the NET profit amount reported on your 2019 Form 1040, Schedule C, line 31. The net profit allowed is limited to $100,000. You will then divide this amount by 12 to obtain your monthly net profit. This monthly net profit is then multiplied by 2.5 to get the PPP loan amount. What if I show a loss? Unfortunately, the SBA does not consider you eligible for a PPP loan.

We have included examples of the calculation below.

Standard Capped Compensation Loss
Annual Net Profit (Loss) $50,000 $250,000 ($25,000)
Number of Months 12 12 12
Average Monthly Net Profit $4,167 $8,333 $0
Multiplier 2.5 2.5 2.5
PPP Loan Amount $10,418 $20,833 $0

Frequently Asked Questions

  • Do payments I make for self-employed health insurance and my retirement get included in this calculation?
    No, these payments are not directly added to the net profit numbers.
  • Can I make adjustments to my 2019 net profit based on what I expect or started to see in early 2020?
    No, the SBA will only allow the PPP loan amount to be based on the 2019 net profit numbers.
  • What if I have employees/W-2 wages on my Schedule C?
    The above calculation will still apply. However, you will be able to add the gross wages, company-paid retirement costs (employees only), company-paid health insurance (employees only), and employer-paid state and local taxes to your net profit number. You will then apply the 2.5 multiplier to the combined employee payroll costs and your self-employed net profit.
  • Are the requirements for loan forgiveness different for self-employed individuals?
    Yes, these requirements include the following:

    • Self-employed compensation is considered forgivable payroll costs. However, it is limited to 8 weeks divided by 52 weeks times your 2019 net profit.
    • Employee payroll costs are considered forgivable payroll costs. This would include employee gross wages, company-paid retirement costs (employees only), company-paid health insurance (employees only), and employer-paid state and local taxes.
    • 75% of the forgivable loan amount must be used for the above payroll costs
    • Mortgage interest, rents, and utilities are considered forgivable costs. However, they cannot exceed 25% of the forgivable loan amount. They must have been claimed on your 2019 Schedule C. Documentation supporting these expenses must be submitted for the expenses to count towards the forgiveness.
    • The use of the PPP loan proceeds is limited to the expenses claimed on your 2019 Schedule C.

Time Is of the Essence

The application start date for eligible self-employed individuals began April 10, 2020. The process may be expedited if you seek a loan from a financial institution in which you already have an existing relationship or line of credit.

When it comes to navigating all of the rules and variances in this legislation, it’s no surprise that the process can be both daunting and confusing. For more support during this uncertain time, reach out to your CRI advisor if you have questions as you prepare to begin the application process.