Understanding PPP Forgiveness for Sole Proprietors

Understanding PPP Forgiveness for Sole Proprietors

Author: FNBO

The Paycheck Protection Program (PPP) provided loans to small businesses across the country at a critical time of need. With millions of sole proprietorships in the U.S., many of these businesses do not have employees, however, this does not mean they are not eligible for PPP loan forgiveness.

Sole proprietorships that received PPP loans are eligible for loan forgiveness consideration. It’s important to note that if a borrower receives a PPP loan, they must apply for forgiveness of the loan through their financial institution or they will have to pay the loan back.

PPP borrowers are eligible for forgiveness in an amount equal to the sum of their eligible expenses during their chosen 8-week to 24-week Covered Period. To be considered for full forgiveness, borrowers must use at least 60% of their loan proceeds on payroll costs.

If you are a sole proprietor, you can still apply for forgiveness regardless of if you have employees or not. The PPP forgiveness guidelines on not reducing headcount or salary do not apply to self-employed owners.

What are “Payroll Costs” for Self-Employed Owners?

Payroll costs for self-employed owners include their own income evidenced on their Schedule C or Schedule F tax forms (which includes wages, commissions, and tips).

Forty percent or less of the loan can go towards other eligible expenses, including business mortgage interest payments, business rent or lease payments, business utility payments, covered operations expenditures, covered property damage costs, covered supplier costs and covered worker protection expenditures. It’s important to note that expenses such as health insurance premiums or retirement benefits are not currently eligible forgivable costs for self-employed owners.

How to Apply for PPP Loan Forgiveness

When applying for forgiveness through FNBO, you will not need to upload an image of your paper form.  You will fill out the online application on the FNBO portal.

First Draw Forgiveness 3508S Applicants ($150,000 and under): You do not need to upload any documentation. However, FNBO and the SBA may request additional documentation as part of its loan review and audit process at a later date.

First Draw Forgiveness 3508EZ and 3508 Applicants (over $150,000): You will need to upload applicable supporting documentation. 

FNBO is currently taking First Draw and Second Draw forgiveness applications. Learn more.

When applying for PPP loan forgiveness, you can learn tips to get prepared here.

PPP Loan Forgiveness Resources

3508S Loan Forgiveness Application and Instructions

3508EZ Forgiveness Application and Instructions

3508 Forgiveness Application and Instructions

Loan Forgiveness Information