The US government passed a new bill on December 27, 2020, the latest stimulus package with additional funding for the Paycheck Protection Program (PPP). The PPP was initially part of the Coronavirus Air, Relief, and Economic Security (CARES) Act. This program intended to ensure that American small businesses receive an 8-week cash flow assistance, which they can get through loans guaranteed by the government. 

If you are already considering getting credit counseling to see if your business would benefit from a loan and whether or not you will qualify, you might want to read on to see how the PPP funding can help you:

A Brief Background

When the second round of loans for the PPP expired on August 8 of last year, no additional funding has followed until now. This round of funding aims to provide loans to businesses to cover payroll and other expenses so that they can continue to operate and pay their workers.

Who Is Eligible for a PPP Loan?

You might be wondering, if you’re an independent contractor or you’re still in the process of starting your own business, would you be eligible for this loan?

Here’s the thing: If you are an existing small business, an independent contractor, a sole proprietor, or a self-employed individual, you are eligible for a PPP loan, given that you complete the requirements asked. Take note of the following:

  • Independent contractors need to submit Form 1099-NEC in 2020 and their Schedule C
  • Self-employed individuals need to submit payroll tax filings as reported to the IRS
  • Sole proprietors need to submit a Schedule C from their filed tax return reflecting the net profit

Additionally, to secure a loan, you need to submit proof that your business experienced at least a 25% drop in revenue. This will then be derived from a comparison of the revenue in any same quarter in 2020 and 2019.

What Can the Loan Be Used For?

It’s mandated that at least 60% of a PPP loan be used to cover payroll and other employee benefits. The rest can then be spent on utilities, mortgage interest, rent payments, accounting and bookkeeping services, and other operating expenditures. 

If you can follow these guidelines carefully, your loan would be 100% forgiven, so it becomes a tax-free grant. Of course, the government takes measures to ensure that the funds are spent the right way. If you don’t abide by the requirements, you can be charged with fraud.

To clarify what expenses are NOT included in payroll costs as per the PPP program, these are payments made to independent contractors and S corps and C corps owners who are not on the payroll. 

How Much PPP Funding Can You Get?

The maximum that you can get from an SBA-approved lender is the average monthly payroll expenses multiplied by 2.5. On the other hand, the maximum amount is set at $2 million. If you are in the food or accommodation industries, you can get up to 3.5 times the average payroll costs, but the maximum of $2 million still applies. 

How Do You Apply for a PPP Loan?

For clarification, SBA does not lend you the money, but they will back the loan from the lender. Not everyone is an eligible SBA lender, so you should do your research before approaching one. 

January 15, 2021 was the set date for small lenders with no more than $1 billion in assets, and PPP loans coming from SBA-approved lenders began on January 19, 2021. 

If you are interested in applying for a loan, you need to prepare these documents as proof of your payroll expenses:

  • Payroll tax filings
  • Payroll processor records
  • Form 1099-MISC records
  • Payroll tax forms 

You might also want to request a comprehensive report from the one providing your payroll services to ensure your documents’ accuracy.


The Paycheck Protection Program offers an excellent opportunity for you to keep your business afloat and ensure your employees get paid during these trying times. Remember that its primary purpose is to protect paychecks, so you must stick to keeping the number of employees you had during the previous 12-month period. Also, make sure you spend at least 60% of your funds on the payroll if you want your loan to be forgiven!

Head Start Biz Solutions can be your financial counselor in Virginia and help you through the entire process of your application for PPP funding through eligible SBA lenders. Our experts can walk you through every step so that you fully understand the process and make sure you are aware of all your options. Get in touch with us today to see how we can help you get funded!