PPP Loans for Sole Proprietors

If you’re a sole proprietor or contractor, you can still receive a Payment Protection Plan (PPP) forgivable loan if you apply before the June 30 deadline. For sole proprietors/contractors, the eight weeks of the loan can be forgiven as a replacement for lost profit. You must, however, provide documentation for cash flow and proof that you spent a percentage of the money (see below) on mortgage interest, rent, or utility payments.

How are sole proprietor PPP loans calculated?

In general, your PPP loan amount will be based on your 2019 net profit, divided by 12, to determine a monthly average net profit. This amount, times 2.5, equals the amount of your PPP loan available. Another way to calculate this is to multiply your 2019 reported net income by 0.154. So the PPP will cover about 10 weeks of net profit.

Since you don’t have to cover payroll, eight weeks worth of net profit – which is referred to as “owner compensation replacement” – can automatically be forgiven without additional spending requirements. Your remaining PPP funds must go towards utilities, rent, and/or mortgage interest expenses in be forgiven.