How the Paycheck Protection Program can help freelancers

The need-to-know:

• Freelancers are eligible for forgivable loans to cover 8 weeks of your pay + some expenses like rent and utilities
• You do not need to prove hardship or lost income to qualify for the loan, or provide collateral
• You are more likely to find a lender if you already have a business banking account
• Start your application here

On April 10, applications to the federal Paycheck Protection Program will open to freelancers. The program, which opened on April 3 for business owners with fewer than 500 employees, is a loan provided for by the CARES Act, and is another financial tool to help you get through the coronavirus pandemic.

Meant to encourage small business owners to retain their employees during the pandemic, the loans are calculated to cover 8 weeks’ worth of a business’ payroll expenses, plus 25% more for things like rent and utilities. The good news: if the money is used for those purposes (75% of the cash must be used for payroll), it will be forgiven, transforming this loan into a grant.

(If you don't use the money in the way prescribed by the PPP, the loan will generate a 1% interest rate for repayment, over a period of up to 2 years. No payments will be due for the first 6 months.)

For sole proprietors, independent contractors, and self-employed people, the payroll portion will be calculated based on your “wage, commission, income, net earnings from self-employment or similar compensation.” If you employed people in a full- or part-time capacity, you will need to continue to pay them at their usual rate for the full 8-week period to qualify for forgiveness. If you paid other freelancers, however, they are not considered employees under this program and are encouraged to apply for their own loans.

The loans are administered by a list of approved banks, and many banks are limiting their application process to those who already have business accounts with them. If you do not already have a business banking account, a few lenders have said they are willing to accept new customers, including Kabbage, NorthOne, Philadelphia's Republic Bank, and Ready Capital. Other lenders have requested authorization from the Small Business Administration to administer these loans, so there may be more available soon.

Demand for the money is high, and there are reports that the program has been difficult to access. As with many of the provisions of the CARES Act, implementation guidelines have been slow to come and many lenders are unsure how best to proceed. Nevertheless, we encourage freelancers who need the assistance to apply as soon as possible on April 10.

Congress is currently weighing adding an additional $250 billion in funding for the program (on top of the original $300 billion provided in the CARES Act) due to the overwhelming demand. Adding your application to the list puts more pressure on them — as does contacting your local rep and letting them know you need this program.