Q: I am self-employed. Can I apply for a federal Paycheck Protection Program loan?

A: Self-employed individuals, sole proprietors, and independent contractors are eligible for loans through this program, which provides forgivable loans for small businesses (less than 500 employees) to help with job retention and certain other expenses.

Small businesses and sole proprietorships could begin applying for these U.S. Small Business Administration-administered loans from April 3, 2020.

Independent contractors and self-employed individuals could apply beginning April 10, 2020.

Interested borrowers can apply through participating SBA lenders, include federally insured depository institutions, credit unions, and Farm Credit System institutions.

It is recommended that you apply with a lender with whom you have an existing banking relationship, if possible.

To be eligible for these loans, a sole proprietorship, independent contractor, or eligible self-employed individual must have been in operation on February 15, 2020.


When applying, you must submit documentation necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship.

For borrowers that do not have any such documentation, the U.S. Treasury Department says the borrower must provide other supporting documentation, such as bank records.

Application checklist:

  • Business start date
  • Government-issued ID
  • Monthly payroll report
  • Account/routing number
  • Medical insurance payment verification (if applicable)
  • Documentation confirming retirement benefits (if applicable)
  • EIDL loan statement (if applicable)
  • 2019 IRS Form 1041 Schedule C/bank records
  • 2019 IRS Form 1099-MISC (independent contractors)/bank records


No collateral or personal guarantees are required for the two-year loans, which also have no borrower fees and an interest rate of 1%. Payments are deferred for six months.

PPP loans are forgivable if the funds are used for payroll costs (75% must be used on payroll costs, mortgage interest, rent, and utilities.

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries or wages decrease. 

Loan amounts are calculated using a payroll-based formula:

  • Payroll costs for last 12 months/12 = average monthly payroll cost
  • Average monthly payroll cost x 2.5 = loan amount

Payroll Costs

Payroll costs, which for an independent contractor or sole proprietor include wages, commissions, income, or net earnings from self-employment or similar compensation, are capped for an individual's compensation at $100,000 annually.

Compensation for an employee whose principal place of residence is outside of the United States cannot be included in payroll costs.

Neither can compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary, nor federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020.

Qualified sick and family leave wages for which a credit is allowed under sections the Families First Coronavirus Response Act also cannot be included.

For more information about the Paycheck Protection Program, contact CBIA's Brian Corvo ( 860.244.1169).