Lending Library

What makes a lending marketplace different from applying through a bank or a single lender? Excellent question. There’s a lot to love about lending marketplaces and the way they’re changing the borrowing experience. Here are 5 things every business owner should know about a business lending marketplace. 

1. You Can Compare Options

You would never book a flight by visiting one airline’s website and saying, “I guess this must be the going rate to Orlando.” Comparing options is a vital part of the process and ensures that you can find a flight that matches the price you want to pay and your scheduling needs. 

A lending marketplace works the same way… but for business loans. The idea that you should have to pick a single lender and roll the dice on the terms you qualify for is, quite frankly, a little outdated. And it doesn’t usually work in the borrower’s favor. With a lending marketplace, you can compare multiple loan offers to ensure you’re choosing the right loan option for your needs. Through a lending marketplace, you can compare the interest rates, loan terms, loan size, and speed of capital of different offers to ensure you feel confident when you apply for a specific loan. 

2. It Gives You Flexibility

When you have multiple financing options, it can open up new ways to attack a specific problem. If you’re looking for financing to cover a large inventory order, for example, you may want a short term loan that gives you the capital fast so you can quickly repay the loan and move onto the next opportunity. Or you may find that opening a line of credit will allow you to make repeated inventory purchases. 

Being able to compare financing opportunities gives you the flexibility to tackle your business challenges in different ways so you can find the strategic path with the highest payoff. 

3. It Saves You Time and Effort

With a loan marketplace, you apply via a single application to compare multiple offers. That’s a heck of a lot better than the typical 25-hour bank application that only gives you a shot at… one loan option. 

What’s more, loan marketplaces typically prioritize your time and make that application short and sweet. We can only speak for ourselves here, but we’ve edited the process down to a single 15-minute application that can unlock offers from 75+ lenders. If you average that out, it means you spend about 12 seconds/lender on the application.

4. You Can Rely on Expert Guidance

When you apply through Lendio, we pair you with a team of experts to guide your application through the process. These experts can answer your questions, help you understand the pros and cons of different loan types, and be there to guide you through each step— from putting your documents together to submitting them for underwriting.

5. You Can Find Funding That Matches the Speed You Need

For some business owners, their first question is, “How fast can I get a loan?” For others, it’s, “How big of a loan can I get?” The beauty of a lending marketplace is that you can choose the option that best fits what matters to you. Need financing in 24 hours? Yup, there’s an option for that. Don’t mind waiting if it means you can secure a lower interest rate? We have an option for you, too. 

A lending marketplace puts you in the driver's seat for your financing experience. Ready for an experience that’s tailored just to you? Apply now. 

Not sure how to choose the right lending marketplace? Check out our tips.

UPDATE: The PPP loan application period ended May 31, 2021. Apply for the Employee Retention Credit today through Lendio.

Over the past year, the SBA has rolled out a series of updates and adjustments to better serve the self-employed who need/want a Paycheck Protection Program (PPP) loan. Here’s everything you need to know: 

How Can You Apply for PPP If You’re Self-Employed?

You can apply for PPP via any lender participating in PPP whether or not they are your primary bank. Online applications make it easy and accessible, in addition to limiting exposure with an in-person application. To apply for a PPP loan online, you’ll need to calculate your payroll costs and gather the required documentation to complete the application successfully. 

For full instructions for how to apply online, consult our Step-by-Step Guide to Applying for a PPP loan. 

Who Can Qualify for a Self-Employed PPP Loan?

To qualify for a PPP loan, self-employed individuals must meet the following criteria: 

• You were in operation as of February 15, 2020
• You are an independent contractor, sole proprietor, or other qualifying business classification with self-employment income
• In 2020, you filed a Schedule C or Form 1040
• Your primary place of residence is the United States
• You meet other program requirements 

How Much Money Can You Get?

You can qualify for 2.5 times your monthly payroll costs— based on either your net profit or gross income during the calculation period. 

In March 2021, the SBA released new guidance allowing the self-employed to choose whether they want to calculate their PPP loans based on net profit or gross income. Previously, calculations were limited to net profit, which limited the funds you could access if you’re in the habit of maximizing tax deductions. 

If you have additional employees on your payroll, their payroll can be used to calculate payroll numbers. You cannot include 1099 workers in your payroll calculations, as they are entitled to apply for their own PPP loans. 

How Can You Calculate Payroll Expenses If You’re Self-Employed?

There are 2 different methods for calculating your PPP loan depending on whether you employ other people. 

How to Calculate a PPP Loan If You’re Self-Employed and Have No Employees

• Retrieve your Schedule C from either 2019 or 2020. If you’re using 2020 to calculate your payroll costs and have not yet filed your 2020 return, you can fill out your 2020 Schedule C and calculate the value.
• Choose the number you’ll use to calculate payroll. This will either be gross income (found on line 7 of the Schedule C) or net profit (found on line 31 of the Schedule C). If the amount is greater than $100,000/year, reduce to $100,000/year. If neither number is greater than $0, you do not qualify for a PPP loan. 
• Take that number and divide by 12 to calculate your monthly payroll costs. 
• Multiply the monthly total by 2.5.

How to Calculate a PPP Loan if You’re Self-Employed and Have Additional Employees

• Choose whether you will use net profit (line 31) or gross income (line 7) on your Schedule C from 2019 or 2020—depending on which period you’re using to calculate payroll. 
  • You will then subtract the following from your net profit or gross income total. Add employee payroll from: line 14—employee benefit programs, line 19—pension and profit-sharing plans, and line 26—wage (less employee credits).
  • The maximum total for this step is $100,000/year. If greater than $100,000/year, reduce to $100,000. If the number is less than $0, set the amount to $0. 
• Calculate your gross wages and tips paid to employees who live principally in the US (line 5c, column 1). If the total for any employee is in excess of $100,000/year, reduce to $100,000. Add this number to the total from the previous step. If you have employees who live primarily outside of the US, subtract their wages.
• Add employer contributions from 2019 or 2020 to employee group insurance (line 14), retirement (line 19), and state/local taxes on employee compensation. 
• Divide the total amount by 12. 
• Multiply that number by 2.5.

If You Have an EIDL That Will Be Financed By the Loan

Whether or not you have employees, you must take an additional step of adding the outstanding amount of any Economic Injury Disaster Loan (EIDL) awarded between January 31, 2020, and April 3, 2020, which must be refinanced into your PPP loan, although if you only received an EIDL advance, you will not need to refinance the advance amount into your PPP loan. 

What Documents Do You Need to Apply for PPP If You’re Self-Employed?

To complete your PPP application, you will need the following documentation. We recommend gathering this information prior to starting the application. 

• • Copy of government-issued ID for all owners with 20%+ share in the business
  • Proof that you were in business as of February 15, 2020:
    • If you have W2 employees: IRS Form 941 from Q1 2020 or a third-party processing report from February 2020. 
    • If you do not have W2 employees: February 2020 bank statement or a customer invoice from February 2020
  • Tax documentation: 
    • Form 1040 with a Schedule C, or:
    • 1099

• If you have employees, you’ll need to provide proof of payroll costs. Choose one:

• • W2s and W3 for your employees
  • IRS Form 944
  • IRS Form 941 (all 4 quarters)
  • 3rd-Party Payroll Processing Report

Can You Use a PPP Loan to Pay Yourself?

Yes, you can use your PPP loan for payroll-related expenses, including paying yourself. To qualify for loan forgiveness, individual payroll amounts cannot exceed the calculation limits, meaning you can pay yourself a maximum of $8,333/month ($100,000/year) to be eligible for forgiveness. 

What Can You Use PPP For?

The allowed uses for PPP loans have been expanded. Due to high demands for the loan, it’s expected that you will still need to spend 60% of loan funds on payroll-related expenses, but you can now use the other 40% on a variety of uses. 

Payroll Costs

• Compensation in the form of salaries, wages, commissions or similar compensation up to $100,000
• Payment of cash tips or equivalent
• Payment for vacation, parental, family, medical, or sick leave
• Allowance for dismissal or separation
• Payment of retirement benefits
• Group vision, dental, disability, or life insurance
• Payment of state or local taxes assessed on the compensation of employees

Other PPP Uses for the Self-Employed

• Healthcare costs related to the continuation of group healthcare benefits during periods of sick, medical, or family leave, as well as insurance premiums
• Mortgage interest payments (but not prepayment or payment of the mortgage principal)
• Rent
• Utilities
• Interest on any other debt obligations incurred before February 15, 2020
• Refinancing an SBA EIDL received between January 31, 2020, and April 3, 2020
• Covered expenditures such as business software or cloud computing services that facilitate: business operations; product or service delivery; the processing, payment or tracking or payroll expenses, human resources, sales, and billing functions; accounting or tracking of supplies, inventory, records, or expenses
• Covered property damage costs
• Covered supplier costs
• Covered worker protection expenditures

What Documents Do the Self-Employed Need to Apply for a PPP Loan?

• 1040 Schedule C for 2019
• Your birth date
• A color copy of your Driver’s License (front and back)
• 1099-MISC, if you have them
• A voided check for your business bank account
• If you have 941 Quarterly Tax Filings (2019, 2020 Q1) or 944 Annual Tax Filings (2019), they should be submitted

You can visit our step-by-step guide on completing the PPP application for full instructions. 

Can You Get a PPP Second Draw?

Self-employed individuals can apply for a Second Draw on their PPP loan if you’ve experienced a revenue reduction of 25%+ due to the pandemic and you meet the other Second Draw qualifications. Learn more about how to qualify and apply for a PPP Second Draw. 

How Much Can a Self-Employed Individual Claim for Payroll Expenses?

The maximum amount for a PPP loan is 2.5 times your average monthly payroll costs. Income listed on a Schedule C in your personal tax return is the only payroll that can be used to calculate your PPP loan amount. If you’ve hired 1099 workers, they cannot be included in your PPP loan calculation and may apply for their own PPP loans. 

Do You Need to Take the Full Amount You Qualify For?

No, you may apply for a PPP loan that is smaller than the maximum you qualify for (2.5 times your monthly payroll costs). 

How Can You Get Your PPP Loan Forgiven?

The SBA has simplified loan forgiveness applications for PPP loans less than $50,000. This provision was specifically designed to support independent contractors and the self-employed. Loans that meet this threshold will not have to meet the employee retention requirements of larger loans, 

If your First Draw loan is $50,000 or less, you can not apply for forgiveness using the simplified Form 3508S. 

The SBA has not yet indicated whether or not this guidance will apply to PPP Second Draw loans. 

What If Your PPP Loan Is Not Forgiven?

If your loan forgiveness application is denied, you will be required to repay the loan. PPP comes with a 1% interest rate and a maximum loan term of 5 years. 

Is Loan Forgiveness Automatic?

No, you must apply for loan forgiveness through your lender. 

As you look to secure funding for your business, you may come across the concept of a lien. A lien gives creditors the legal right to claim your property if you fail to pay them back for a loan or purchase. Liens are most commonly found in mortgages, where lenders can take your house if you fail to meet your monthly payments. 

A lien isn’t necessarily a bad thing, but it can impact your credit and financing opportunities. Let’s dig deeper into a lien’s definition and what it means for your business.  

Is a lien bad?

A lien isn’t necessarily a bad thing to have. Many people take out voluntary liens when they accept mortgages or business loans. If you keep making payments related to this lien—proving to your lender that they will get their money back—then a lien isn’t something you need to worry about. 

However, there are instances when a lien can be bad. An outstanding lien can mean that you hold unpaid debts to various creditors or vendors. When this condition applies to a property, it could relate to your mortgage lender or the local government that collects property taxes. If you fail to pay these obligations, then your creditors have the right to seize your property or take legal action against you.  

What happens when you have a lien against you?

If you have an unpaid lien against you—or if you stop making payments on it—then the lienholder can step in and reclaim their assets. The person who issues the lien is known as a lienholder. For example, your bank might be your lienholder when issuing your mortgage.  

In theory, the bank or financial service provider can seize your business if you have outstanding liens. They can evict you and sell your property at auction. This action allows your lender to reclaim some of their lost funds, even if they sell your property below market value. 

However, not every lien against you can lead to foreclosure or seizure. Lenders often do whatever they can to get business owners to meet their financial goals. They will also take business owners to court in hopes of recouping the lost funds in cash rather than spending time selling off assets. Navigating the seizure of assets and the resale process is time-consuming for lienholders and can severely damage the credit of loan recipients.  

How do you get a lien removed?

You have a few options if you need a lien removed from a property or asset. First, you can pay off the debt. This option is the best if you took out a loan and created the lien. You might also need your lienholder to submit a release-of-lien form if you paid the lien holder before the lien was placed. This document needs to be notarized and will protect your accounts from going to collections. 

Most entrepreneurs have liens related to their business assets. If you make regular payments against your debt, you can grow your credit and keep your lienholders happy. The best way to avoid bad liens is to keep up with your repayment schedule as best as you can.

UPDATE: The PPP loan application period ended May 31, 2021. Learn about financing options available for small businesses today at Lendio.com

FAQs About the Paycheck Protection Program (PPP)

As was the case with the initial round of PPP, details for the program weren’t fully ironed out until after the bill had passed. As a result, many small business owners were left scratching their heads as to how PPP works. We know how vital this financial lifeline is for many small business owners. Here are answers to some of the most common questions small businesses have asked us about PPP. You can also find primary details regarding the loan (like how to calculate your payroll costs and what the loan can be used for) on our PPP page. 

When will the PPP extension end?

We recommend you apply for PPP early to ensure that your application has enough time to move through processing by the lender and be submitted to the SBA prior to the May 31, 2021, deadline.

How much is available in the new round of PPP?

How large of a loan can a business qualify for through PPP?

The program also includes the following caps:

• Maximum total loan amount: $10 million (aggregate total for First and Second Draws)
• Maximum loan amount for a Second Draw: $2 million
• Maximum loan total for businesses within a corporate group: $20 million

What protections have been added to PPP?

• Restaurants, hotels, or live venues that fall under a NAICS code starting with "72" can apply for 3.5 times their monthly payroll costs on their Second Draw. 
• Live event and production companies that have been forced to close may be eligible for a special grant.
• $12 billion have been specifically earmarked for BIPOC-owned businesses.  

What Is Your NAICS Code Used For?

By having a unified system for companies to identify themselves, regulatory bodies and other organizations can protect business owners and ensure America has a balanced economy.

NAICS Codes and the Paycheck Protection Program (PPP)

Additionally, this code helps ensure that companies applying for specific loans (like those related to hospitality) fall firmly within the field. That way, a company with a code related to advertising that had hospitality clients wouldn’t take from an actual hotel or restaurant—as an example.

Keeping your NAICS code on hand before applying for PPP assistance can make the process go faster and help you apply with confidence.

What is needed to qualify for a First Draw on a PPP loan?

• Your business was operating as of February 15, 2020. 
• You own a small business with associated payroll costs, you run a nonprofit with associated payroll costs, or you’re a sole proprietor/freelancer.
• You certify that your business has sustained economic damage due to the COVID-19 pandemic. 
• You have 500 or fewer employees. 
• You’re an independent contractor, sole proprietor, self-employed individual, or a business partner (For limited partnerships, only one PPP application can be submitted per partnership.)
• You have employed for whom you paid salaries and payroll taxes. 

Will you be able to get another PPP loan if you received one during a previous round?

What will the requirements be for a Second Draw on a PPP loan?

• Your business has fewer than 300 employees. 
• You can show a 25% revenue reduction during the first, second, third, or fourth quarter of 2020 (relative to the same quarter in 2019). 

How much can you qualify for in a Second Draw?

The maximum loan amount for Second Draws is $2 million. The maximum aggregate total for First and Second Draws is $10 million (if you happened to receive $9 million in your first draw, you would only be able to receive $1 million in the second draw). The maximum that can be borrowed by businesses within a corporate group is $20 million. 

What additional businesses are now eligible for a PPP loan?

• News organizations
• Some hospitals owned by government entities
• Businesses that receive legal gaming revenue (if they meet applicable requirements)
• Electric, telephone, and housing cooperatives
• 501(c)(6) organizations and 501(c)(19) tax-exempt veterans organizations
• Tribal businesses
• Destination marketing organizations (if they meet applicable requirements)
• Certain faith-based organizations

Is Lendio a PPP lender?

If not a lender, what is Lendio’s role with PPP?

What is the lender’s role with PPP?

Does the lender actually underwrite each file?

How long does the SBA take to process the application once submitted by a lender?

What is a PLP Number?

Is there a difference between a PLP number and an SBA loan number?

Can a borrower be denied a PPP loan after being issued an SBA loan number?

Is it possible to cancel my SBA loan number with my lender?

Why am I being asked for a credit check?

How long will it take the lender to fund the loan?

If a lender is unable to issue funds due to a borrower-caused delay, like missing paperwork, the SBA allows 20 days for funds to be disbursed. If the lender still has not received the necessary information at the end of that 20-day period, the lender is required to cancel the loan.

Why was I denied? Do I need to resubmit somewhere else?

If your application is flagged by E-Tran due to one of these issues, it may still be possible to fix the issue. Once you fix the issue, you can reapply for the loan, and we’ll do our best to get you resubmitted through a different lender. Additionally, to increase your odds of approval and funding, we recommend you apply at as many places as possible. 

Another common reason for denial is that there is already an SBA loan number under that Taxpayer Identification Number (TIN), which often happens when a business owner who owns multiple businesses applies for a loan. 

How will the SBA review borrowers’ required good-faith certification concerning the necessity of their loan requests?

Borrowers with loans greater than $2 million may still have made the certification in good faith. All loans greater than $2 million, and other loans as appropriate, will be subject to SBA review. Borrowers that did not have a basis to make the certification (concerning the necessity of the PPP loan request) will have to repay outstanding PPP loan balances and will not be eligible for loan forgiveness.

If the borrower repays the loan, the SBA will not pursue administrative enforcement. Any borrower that repaid a PPP loan in full by May 18, 2020, will be deemed by the SBA to have made the required certification concerning the necessity of the loan request in good faith.

Are employees of foreign affiliates included for purposes of determining whether a PPP borrower has more than 500 employees?

According to the interim final rule, borrowers must count non-US employees toward the 500 limit, but these employees are excluded for average payroll and loan calculations.

Are PPP loans taxable?

Initially, there was uncertainty as to whether a business or nonprofit could deduct expenses paid for with PPP loan funds. The Economic Aid Act has clarified that these expenses are now tax-deductible. More guidance from the IRS is needed on just how this process will work. 

However, some states are currently taxing these funds, so you should check with your local accountant about how your state is handling this issue.

For more details on how to approach your taxes and potential deductions in relation to PPP, you can consult our post, “Are Business Expenses Paid With PPP Loans Deductible?”

How long does PPP last?

How long will the Paycheck Protection Program last?

Will there be another PPP loan round?

If you’re considering applying for a PPP loan, we strongly encourage you to do so sooner rather than later. There is no guarantee that funds will remain available through May 31, 2021, or that there will be another round of PPP loans.

Apply for your PPP loan now through Lendio's online application.

Lendio strives to provide you with the most current information as it relates to the Paycheck Protection Program, related SBA programs, and relevant regulations. The rules and regulations governing these programs are being regularly clarified by the SBA, and other agencies. In some cases, the provided guidance may directly conflict with other competing guidance, laws, rules, or regulations. Due to these changes, Lendio cannot guarantee that the information contained in this page reflects new changes or updates.

Lendio advises you to review the SBA guidelines and regulations on your own and determine your Company’s best approach to receiving SBA loans. Lendio urges you to consult your own attorneys, lawyers, and consultants to make the best decision possible. The information contained herein should not be construed as legal or tax advice, and should not be relied upon as such.

Becoming an entrepreneur is an exciting venture that can often be the fulfillment of a life-long dream. But business owners also face a variety of challenges, and POC business owners face additional and unique challenges. New entrepreneurs wading into unchartered territory can often learn from the advice—and mistakes—of others. We asked a handful of POC business owners for their best advice to help fellow POC entrepreneurs entering the small business world.

1. Get a Minority-Owned Certification

As soon as you can, Mary Angela Munez, owner of GoLucky Studios, recommends working toward getting certified as a minority-owned business. “This makes you visible and able to accept government contracts that are set aside to provide opportunities to minority business owners,” she explains. “Right now, 5% of all federal money has been allocated to businesses that hold this designation.” State and city-level certifications can also provide access to bids on local contracts.

2. Plan for Success

You probably want to hit the ground running, but Elisabeth Jackson, a small business owner of 3 years with over 8 years of experience in the small business world, warns against rushing the process and says you should instead focus on getting your systems right. “Black women are the fastest-growing entrepreneurs but are significantly absent when it comes to long-term profitable businesses,” she notes.

“Document everything you do, and create procedures and systems that can replace your workload for you as you grow,” Jackson says. “Also, I recommend having a strong product suite that increases your client retention so you aren't relying on one product to make all your money.” In addition to not relying on one product, she advises against relying on one person—namely, yourself.  “Don't get caught up trying to do everything because that’s not sustainable in the long run.”

3. Hire Well

And since you can’t do everything yourself, Nerissa Zhang, CEO of The Bright App, recommends you hire help as soon as you can. However, she says it’s important to hire good people, and it’s equally as important to let those people go when it becomes clear that they’re not a good fit. “The reality is that there are many people in this world who will not respect the leadership of people of color, particularly if you’re also a woman,” Zhang explains. “As soon as you see any signs of disrespect from someone you’re paying, do not hesitate for a second—fire them immediately.”

4. Put Your Business Online

COVID-19 has severely hampered brick-and-mortar businesses. But even in a post-pandemic world, Ray Blakney, CEO and cofounder of LiveLingua.com, recommends putting your business online.  "In addition to the standard benefits of online business—such as lower startup costs and overhead, global reach, etc.—there are some unique benefits for POC.” 

For example, he says that since there aren’t a lot of online businesses run by POC (comparatively speaking), this is an opportunity to stand out.  “Not only can the unique point of view be shown on the website itself—it can also be used in marketing, as many journalists, podcast hosts, and websites are looking to include more voices from people of color, and they have a hard time finding people who can speak to this,” Blakney explains.

5. Be Yourself—and Be Sharp

To Tasha Booth, CEO and founder of The Launch Guild, being an entrepreneur is an opportunity to be your “authentic” self.  “Especially as a person of color, you will always be ‘too much,’ ‘too loud,’ or ‘too something’ for someone in whatever industry you’re in, and that’s okay.” But the beauty of being a small business owner is that you get to make the decisions and run the operation as you see fit. “Don’t think you have to fit a specific mold or cater to certain people to succeed and feel good about the business you’re building,” Booth says.   

Michelle Diamond, CEO and founder of Elevate Diamond Strategy, agrees. “Understand the value and uniqueness you bring as a POC,” she says. “But at the same time, unless your small business is focused on your ethnicity or heritage, lead with your skill sets and the value of your products and services only.”

6. Embrace Those Who Embrace You

You may have a target audience, but Booth recommends embracing the community that embraces you.  “When I first started running Facebook ads for my business 2.5 years ago, I noticed that the women responding to the ads and signing up for my services were primarily Black women.”

Initially, she says she was bothered that non-POC were not responding and believed it was only because she was a Black woman.  “But now, I celebrate the fact that other Black women see my success and see what the possibility can be for them,” Booth says. “Rather than thinking of it as a detriment, I see it as one of my superpowers and something that sets me apart from all other entrepreneurs in the online business/virtual support industries, so embrace the people who are embracing you.”

7. Invest in Your Professional Development

Learning is a lifelong process – especially when you’re a small business owner. And according to LaKesha Womack, a leadership development specialist, it’s important to invest in your professional education. “No, I don't mean getting another graduate degree: however, working with a business coach or consultant to help you develop a plan for your business and to hold you accountable will be one of the best decisions that you can make.”

While many entrepreneurs are great at what they do – she says being a successful business owner entails more than providing a service or product. “Working with a professional who has experience with business operations, human resource management, branding, and marketing can help your business to not only survive, even in turbulent economic environments, but they can also help to prepare you for growth.” Mentors for POC can also provide valuable support and advice to take your business to the next level and perhaps point you toward funding sources for business owners of color. 

8. Focus on the Positives

Being a POC entering the small business world will involve challenges, but that shouldn’t be your focus. “Oftentimes, POC may assume that they will encounter racism or bias, and while that does happen sometimes, the truth is if you have that mindset, you will attract more of the same,” says Diamond. However, she believes that the majority of people care more about your ability to add value to their lives than the color of your skin. “Focus on succeeding and having a great business; there is no limit to the success you can achieve for yourself, family, and community."

UPDATE: The PPP loan application period ended May 31, 2021. Apply for the Employee Retention Credit today through Lendio.

Lendio strives to provide you with the most current information as it relates to the Paycheck Protection Program, related SBA programs, and relevant regulations. The rules and regulations governing these programs are being regularly clarified by the SBA, and other agencies. In some cases, the provided guidance may directly conflict with other competing guidance, laws, rules, or regulations. Due to these changes, Lendio cannot guarantee that the information contained in this page reflects new changes or updates.

Lendio advises you to review the SBA guidelines and regulations on your own and determine your Company’s best approach to receiving SBA loans. Lendio urges you to consult your own attorneys, lawyers, and consultants to make the best decision possible. The information contained herein should not be construed as legal or tax advice, and should not be relied upon as such.

UPDATE: The PPP loan application period ended May 31, 2021. Apply for the Employee Retention Credit today through Lendio.

If you’re a 1099 worker (or a small business that employs 1099 workers) seeking a Paycheck Protection Program (PPP) loan, you likely have questions about whether or not you qualify for a PPP loan, what you need to apply, and how potential loan forgiveness will work. We’ve put together some of the most common questions we’ve received surrounding PPP and 1099 workers to give you the information you need. 

How Can 1099 Workers File for a PPP Loan?

Independent contractors can submit a PPP loan application through their bank or a lending marketplace. Given that many banks aren’t prioritizing the smallest loans, we’ve stepped up to help independent contractors secure funding. We’ve partnered with multiple PPP lenders to maximize your chances of funding, and we’ve streamlined the application to make it fast and simple. 

PPP applications opened for 1099 employees on April 10, 2020. 1099 employees are now eligible to apply for their own PPP loans through their banks or a loan marketplace.

Can 1099 Workers Receive a Second Draw?

Yes, qualifying independent contractors can receive an additional disbursement of funds by applying for a Second Draw. Just like the First Draw, a borrower can receive up to 2.5 times their monthly payroll costs through a Second Draw. To qualify you must meet the following criteria:

• Have received a First Draw through the PPP program
• Have used all First Draw funds (or plan to use them)
• Have used First Draw funds only for allowed uses
• Experienced a 25%+ reduction in revenue in 2020 compared to 2019

Will You Need to Provide Documentation to Prove a 25%+ Revenue Reduction for Second Draws?

Documentation proving revenue reduction is only required for loans over $150,000. It’s unlikely that most 1099 workers would have a loan more than that amount, given that independent contractors may only claim payroll for themselves (in addition to other payroll-related expenses) as a part of their payroll calculations and the SBA has capped salaries for individual employees at $8,333/month ($100k/year). It is likely that you will be required to certify this revenue reduction instead. 

What Documents Do 1099 Employees Need to Apply for a PPP Loan?

• 1099-MISC
• 2019 Schedule C, which is now required. If you haven’t yet filed a Schedule C, you must complete one and submit it with your 1099-MISC
• Your birth date
• A color copy of your Driver’s License (front and back)
• A voided check for your business bank account
• If you have 941 Quarterly Tax Filings (2019, 2020 Q1) or 944 Annual Tax Filings (2019), they should be submitted

You can visit our complete step-by-step guide to completing an application for full instructions. 

Why is a Voided Check Required in the Lendio Application?

A voided check is required to demonstrate business revenue deposits.

Will a PPP Loan for a 1099 Worker Be Forgivable?

If PPP funds are used for allowed uses during the covered period of the loan (the 24 weeks immediately following disbursement of funds), then a borrower will likely qualify for loan forgiveness. 

The SBA has streamlined the forgiveness with a one-page application for loans under $150,000. Additionally, for loans under $150,000, you will not be required to submit documentation on your forgivable expenses. Instead, you will be asked to certify that funds were used for forgivable expenses. 

Can You Receive Unemployment at the Same Time as Your PPP Loan?

No. PPP loans cannot be used for the same purpose as other government funds at the same time. So you cannot receive unemployment at the same time as you’re using PPP funds to cover lost payroll. 

If you are currently receiving unemployment, you will have to cancel it starting on the date your PPP loan is funded. If you are still suffering from lost wages after PPP funds have been exhausted, you can apply for unemployment through your state agency. 

Can You Choose the Start Date For the Loan?

You cannot choose the start date for the loan. The loan term begins the day you receive funds. 

Can a Small Business Include 1099 Employees in Their Payroll Calculations?

No, 1099 employees should not be included in a small business’s payroll calculations for their PPP loans. 1099 employees are considered their own businesses under the PPP. As of April 10, 2020, 1099 employees are eligible to apply for their own PPP loan. 

Why Does the Application Ask If You Have 1099 Employees If You Can’t Include Them?

Guidance for PPP loans asks if a small business was open as of February 15 and “had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.” 

Treasury guidance regarding 1099 employees pertains to eligibility. You need to either have employees who receive a salary or 1099 employees who you pay in order to qualify for the loan. It does not pertain to loan size calculations. 

Lendio strives to provide you with the most current information as it relates to the Paycheck Protection Program, related SBA programs, and relevant regulations. The rules and regulations governing these programs are being regularly clarified by the SBA, and other agencies. In some cases, the provided guidance may directly conflict with other competing guidance, laws, rules, or regulations. Due to these changes, Lendio cannot guarantee that the information contained in this page reflects new changes or updates.

Lendio advises you to review the SBA guidelines and regulations on your own and determine your Company’s best approach to receiving SBA loans. Lendio urges you to consult your own attorneys, lawyers, and consultants to make the best decision possible. The information contained herein should not be construed as legal or tax advice, and should not be relied upon as such.

You’ve reported your annual revenue, time in business, and credit score. You’ve provided bank statements, and you made it official by clicking “Submit” at the end of the Lendio application. If you’re anything like us, you may be refreshing your screen and wondering, “What comes next?”

We value transparency and giving business owners the power that comes from financial literacy, so we’re going to outline the steps to the best of our ability. “To the best of your ability,” you ask. “What does that mean?” Well, part of what makes our marketplace so special is that it relies on some pretty complicated tech to match you with the best options from our network of premium lenders. Because the experience is customized for each borrower, we can’t give a one-size-fits-all answer, but we can give you a general sense of what usually happens. So, where were we?

Step 1: Our Smart Application Matches You With Loans

After submitting an application, most borrowers will be matched with loan offers from our network of curated business lenders. Our tech analyzes your application and compares it against the 10+ loan products offered by the 75+ lenders in our network. In other words, our little internet robots do some pretty heavy administrative lifting to find you the loan offers you need as quickly as possible. 

In some cases, your application may not be a current fit for one of our lenders. If that happens, we’ll set you up with tools that can help you achieve the financing you need now and help you make your business more appealing to lenders down the road. Our mission is to fuel the American Dream, so you’ll never hear us say, “Tough luck.” 

Step 2: Funding Managers Provide Personal Attention and Expert Advice

“Every journey is a little different,” explains Kris Glaittli, Lendio’s Senior Director of Marketplace & RMT. For that reason, borrowers are then paired with funding managers, who are dedicated loan experts. After you’ve received your loan matches, you’ll probably receive a call from your funding manager. They’ll help you complete anything that’s missing from your application, and they’ll ask you some questions about your business. 

This information will help your funding manager better understand your financing needs so they can point you in the direction of the best financing option for you. “We really do try and match the borrower’s needs so it creates a unique experience,” Kris says. This call also allows your funding manager to address any potential red flags in your application. If you switched bank accounts a few months back or have any lawsuits, the funding manager will try to address it and make the case to the lender on your behalf. 

Step 3: Varies Based on the Lender

Once your funding manager has assessed your needs and helped you complete your application, the next steps vary from lender to lender. The order may change depending on the lender, but you can expect the following to (generally) happen:

• Your loan application will be submitted to the lenders
• The loan will go through the underwriting process
• You receive the loan offer from the lender
• You may have a phone call with the lender, called the merchant interview (if this happens, it’s usually right before funding)

Step 4: Receive a Decision

Finally, you’ll receive a decision from your lender. If you’re approved, you may receive funds in as little as 24 hours, depending on the loan type. If you’re denied, no sweat. You can still apply to other lenders without creating a new application. That’s the beauty of a marketplace.