# How to Calculate Your PPP Loan Amount if You’re Self-Employed

Wondering how to calculate your PPP loan amount if you’re self-employed? Check out this blog post for a step-by-step guide.

Checkout this video:

## What is a PPP Loan?

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

The PPP offers loans up to \$10 million for small businesses and non-profit organizations that maintain their payroll during the COVID-19 pandemic. The maximum loan amount is 2.5 times your average monthly payroll costs, with interest rates not to exceed 4%. Loans may be forgiven if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

## How to Calculate Your PPP Loan Amount

The PPP loan is a government-backed loan that is meant to help small businesses during the COVID-19 pandemic. If you are self-employed, you can still apply for a PPP loan. The loan amount you can receive is based on your average monthly payroll costs. In this article, we will show you how to calculate your PPP loan amount if you are self-employed.

### Average Monthly Payroll Costs

If you’re self-employed, you can calculate your PPP loan amount by taking your net profit for 2019 (or 2020) and dividing it by 12. The resulting figure is your average monthly payroll cost.

For example, let’s say your net profit for 2019 was \$50,000. This would give you an average monthly payroll cost of \$4,167 (\$50,000 divided by 12).

The PPP loan amount you’re eligible for will be 2.5 times this figure, so in this case, it would be \$10,417 (\$4,167 x 2.5).

To calculate your PPP loan amount if you’re self-employed, you’ll need to add up your average monthly self-employment income for 2019 or 2020.

If you didn’t have any self-employment income in 2019 or 2020, you can use your average monthly income from 2018.

Once you have your monthly average self-employment income figured out, you’ll need to multiply that number by 2.5.

For example, let’s say your monthly average self-employment income for 2019 was \$5,000. To calculate your PPP loan amount, you would multiply \$5,000 by 2.5, which would give you a loan amount of \$12,500.

### Determine Your PPP Loan Amount

If you’re self-employed, you can still apply for a PPP loan. The process is a little different, but it’s still relatively simple. Here’s what you need to do:

First, calculate your average monthly payroll costs for the past year. This includes things like salary, wages, tips, health insurance, and retirement benefits.

Next, multiply your average monthly payroll costs by 2.5. This will give you your maximum loan amount.

Now, calculate your maximum PPP loan amount by subtracting any Economic Injury Disaster Loan (EIDL) amounts you’ve already received.

You can use this calculator to determine your maximum PPP loan amount.

## How to Apply for a PPP Loan

Self-employed individuals have a few different options for applying for a PPP loan. You can apply through any participating lender, including online lenders, banks, and credit unions. Some lenders may have specific requirements for self-employed borrowers, so be sure to check with your chosen lender before applying. The SBA has outlined specific guidelines for self-employed individuals to calculate their PPP loan amount, which can be found here.

### Find a Lender

The first step in applying for a PPP loan is to find a lender.

Most banks and credit unions that participate in the SBA’s 7(a) loan program also offer the PPP. But there are also many online and alternative lenders that are participating in the program.

To find a PPP lender, you can:
-Check with your local bank or credit union
-Look for a list of PPP lenders on the SBA’s website
-Use the SBA’s Lender Match tool to find lenders in your area

Once you’ve found a lender, you’ll need to complete an application and provide supporting documentation.

### Gather the Required Documentation

You will need to provide the following documentation to apply for a PPP loan:

-Your most recent IRS Form 1040, Schedule C, showing your net profit for the year
-Your bank statements from the past 12 months

If you are not self-employed, you will also need:
-Your most recent tax return (Form 1040, Schedule C)

If you’re self-employed and interested in applying for a Paycheck Protection Program (PPP) loan, you’ll need to submit your application through an approved lender. The SBA has a network of more than 5,000 approved lenders, which includes most major banks and many community banks and credit unions.

To find an approved lender, you can visit the SBA’s website or the website of your local bank or credit union. Once you’ve found an approved lender, you’ll need to complete and submit a PPP loan application. The application will ask for information about your business, including your average monthly payroll costs.

-Your total payroll costs for the previous 12 months
-The number of employees you had during that time period
-Your average monthly payroll costs for the previous 12 months

Once you have all of this information, you can calculate your average monthly payroll costs by dividing your total payroll costs by the number of months in the period. For example, if your total payroll costs for the previous 12 months were \$120,000 and you had 10 employees during that time period, your average monthly payroll costs would be \$10,000 (\$120,000/12 months).

After you’ve calculated your average monthly payroll costs, you’ll need to determine the loan amount you’re eligible for. The maximum loan amount is 2.5 times your average monthly payroll costs up to \$10 million. So in our example above, the maximum loan amount would be \$25,000 (\$10,000 x 2.5).

## What to Do if You’re Denied for a PPP Loan

If your small business or sole proprietorship has been denied for a Paycheck Protection Program (PPP) loan, you may be feeling uncertain about what to do next.

Luckily, there are a few options available to you. You can:

-Apply for a conventional small business loan from a bank or credit union
-Look into alternative financing options, such as a business line of credit or invoice financing
-Use personal savings or funds from friends and family