Do I Qualify for the PPP Loan?

By Owen Yin and Brian Miura-Wong on April 24, 2020

Most small businesses should be able to qualify for the Paycheck Protection Program.

If your business is based in the U.S., has 500 employees or less, and if your business is financially affected by COVID-19, you should be eligible for the PPP loan.

While the PPP is meant for all small businesses—from sole proprietors to C corporations—there are restrictions and requirements that may ultimately disqualify you.

General disqualifiers

If any of these statements apply to your business, you are not eligible for the PPP.

  • You were not in operation on or before February 15
  • You employ household employees such as nannies or housekeepers (this is not considered a business)
  • An owner of 20% or more is involved in the justice system (incarcerated, on probation or parole) or has been convicted of a felony within the last five years
  • You, or any business owned or controlled by you or any of your owners, is delinquent or has defaulted on a loan from the SBA or any other Federal agency within the last seven years
  • You or your business is bankrupt or is currently in bankruptcy proceedings
  • You are an officer or key employee of the lender you are applying with, or a close relative of one. You may apply for the PPP with an unaffiliated lender
  • Your business is a hedge fund or private equity firm
  • You do business in an industry that is generally not eligible for SBA 7(a) loans, such as speculation or multi-sales distribution

Independent contractors

In order to apply for the PPP, you will need a tax-ready 2019 Schedule C from your personal Form 1040 tax return. While it does not have to be filed, it must be complete and accurate, so you will need all your 1099-MISC forms handy in order to complete your Schedule C.

You must have reported a net profit on your Schedule C in 2019.

If you do not have a 2019 Schedule C because your business was not in operation in 2019, further guidance is pending from the Treasury.

Sole proprietorships and Single-Member LLCs

You will need a tax-ready 2019 Schedule C from your personal tax return. While it does not have to be filed, it must be complete and accurate.

You must have reported a net profit on your Schedule C in 2019.

If you also have employees on payroll, you do not need a net profit, but you must have payroll tax forms 940 and 941/944 for 2019.

Partnerships

Individuals should not submit separate applications, but only submit one PPP application on behalf of the partnership.

If you also have employees on payroll, you should have payroll tax forms 940 and 941/944 for 2019. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

S corporations

Only S corps who have payroll are eligible for the PPP. If you were only paid through owner draws or distributions and did not pay payroll tax, you have no payroll costs to report and the PPP is not suitable for you.

If you also have employees on payroll, you should have payroll tax forms 940 and 941/944 for 2019. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

C corporations

Only C corps who have payroll are eligible for the PPP. If you were only paid through owner’s draws or distributions and did not pay payroll tax, you have no payroll costs to report and the PPP is not suitable for you.

If you also have employees on payroll, you should have payroll tax forms 940 and 941/944 for 2019. The SBA guidelines allow for payroll processor records containing equivalent payroll tax information, but your lender may not accept those.

Nonprofits

You will need to have run payroll in 2019 to qualify for the PPP. Faith-based organizations should also consult the SBA’s guidance on eligibility.

How to apply for the PPP

To apply for your PPP loan, you’ll need to apply through a lender who is participating in the PPP program.

You can find an official list of PPP lenders here.

We recommend starting with community banks and credit unions, as they will be the most able to serve small businesses. You can also apply through an online lender such as BlueVine. It doesn’t hurt to apply through more than one lender. Once you’re approved for a loan, the SBA will automatically reject your second application.

Further reading: Documents Required for the PPP Application

I think I’m disqualified. What else can I do?

There are lots of other funding options out there! You can check out your options below.

A final note: all businesses are unique and it’s possible that this article did not fully cover your situation. If your situation is more complicated, a consultation with a CPA or your lender is highly recommended.

Explore alternative funding

If you don’t qualify for the PPP but still need cash flow to keep your operations going, here are resources we recommend looking into.

Support from government

The employee retention tax credit

You can be eligible for payroll tax credits if you keep your employees on payroll, if you paid COVID-19-related sick leave for employees, or if you had to suspend operations.

Further reading: Employee Retention Credits: A Simple Guide (COVID-19)

The Express Bridge Loan

You can borrow up to $25,000 for disaster-related purposes from a lender you have an existing banking relationship with.

Further reading: The Express Bridge Loan Pilot Program (A Simple Guide)

Support from large businesses

Many large companies have stepped up with resources and funding for small businesses affected by COVID-19.

Facebook Small Business Grants Program

Facebook is providing cash grants and ad credit to small businesses with 2–50 employees.

  • Applications will be open to cities on a rolling basis. Visit the site to see if it’s open for your city

  • Must be a for-profit company that has been in business for over a year

You can apply here.

Google Ad Credits for Small and Medium-sized Businesses

Google is providing ad credits to small and medium businesses that advertised on Google in 2019. Credits will be added automatically.

Salesforce Care Small Businesses Grant

$10,000 grants for small businesses. Applications not yet open.

Regional support

There are many region-specific supports and resources offering emergency funding. Check your local chamber of commerce, economic development office, or nonprofit for relief programs.

Further reading: COVID-19 Resources, State by State

Support for your industry

Your industry organization may offer grants and specialized support. Here are a few active funding sources:

Restaurant Employee Relief Fund

The National Restaurant Association Educational Foundation is providing grants of up to $500 for impacted employees. Food delivery workers (such as those who work with Uber Eats and Doordash) are eligible.

The Photographer Fund

Format is providing up to $500 in grants to impacted photographers.

CERF+ Emergency Assistance

Up to $3,000 in grants to established artists working in a craft discipline.

Support for self-employed individuals

Federal Stimulus Checks

The federal government is providing up to $1,200 to eligible individuals. You can check the status of your payment at the IRS Get My Payment site.

Pandemic Unemployment Assistance

Self-employed individuals and independent contractors are eligible for unemployment benefits if they find themselves unemployed, partially unemployed, or unable to work due to COVID-19. Visit your state’s Department of Labor site to apply.

Further reading: Unemployment Benefits and the CARES Act

Freelancers Relief Fund

Up to $1,000 in grants for freelancers experiencing financial or health hardship as a result of COVID-19. **Applications are temporarily closed**.

Private lenders

Banks, merchant processors, and other private lenders may offer lines of credit or other lending options. But the terms won’t be as favorable as the PPP and EIDL. One other thing: some of the below offers may have been changed due to COVID-19.

Traditional bank loans

We’ve compiled our recommendation of the best bank loans for small businesses in 2020.

Business line of credit

A line of credit is more flexible than a bank loan, and usually cheaper too. Here’s our recommendations of the best business lines of credit in 2020.

Business credit card

Using a credit card to float your business is usually a bad idea. However, some business credit cards offer 0% interest for the first year. Check out our recommendations for the top business credit cards to see if any fit your needs.


This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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