PPP Loan Forgiveness for Sole Proprietors and the Self-Employed


When the pandemic began, the Small Business Administration (known as the SBA) announced a Paycheck Protection Program (known as the PPP loan) which was meant to benefit small business owners and ensure that unemployment numbers did not rise. 

However, when the PPP Loan application process was opened, lots of larger businesses took advantage and many small businesses were left out, even though they arguably were in greater need of the money. 

Shockingly, during the first round of PPP Loan applications, sole proprietors and the self-employed such as freelancers were not deemed eligible for funding. However, this was corrected, and the eligibility quota was increased to include such businesses. 

The PPP Loan was a great way for the self-employed and sole proprietors to maintain a living while they were unable to work during the pandemic. However, now that lockdown has begun to subside and things seem to be getting back to normal, it’s time for the PPP loans to be repaid or forgiven. 

In this guide, we’ll be taking you through everything you need to know about applying for PPP loan forgiveness, so you can determine whether you qualify and if it is the right choice for you. 

Also read: What Qualifies As Proof Of Income?

Table Of Contents

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Qualifying for PPP Loan Forgiveness

Before you apply for PPP loan forgiveness, you need to know whether you qualify first. This is because the PPP loan had to be used on specific expenses such as non-payroll expenses such as mortgage interest and rent payments, or ideally on your own salary. 

The eligible expenses of the PPP loan were strict, but everything is clearly laid out in the contracts, so you should have a good understanding of what you were able to use the money on. 

In terms of qualifying for PPP loan forgiveness, it differs depending on what kind of business you own, or what kind of trader you are. In this section, we’ll be looking at how someone who is self-employed qualifies for PPP loan forgiveness. 

Firstly, a minimum of 60% of the total loan must be used for either compensation, payroll, or salary, although the PPP loan did allow self-employed individuals to use 100% of the loan money to pay themselves if they wanted to. 

The rest of the loan money must have been used on genuine business expenses including rent payments, insurance premiums, protective gear, and other non-payroll expenses related to your business. 

Depending on when you applied, the loan money must have been spent between 8 and 24 weeks after receiving the loan money in your bank account. 

Also read: Mandatory Deductions From Your Paycheck

When Am I Eligible For Loan Forgiveness?

You can apply for PPP loan forgiveness a day after your covered period has ended and up to 10 months after this. Once the 10 months are up, you will have to pay interest on any unpaid or unforgiven amount of your loan, so make sure you apply for loan forgiveness as soon as you are able. 

Full loan forgiveness can be applied provided that you meet the following requirements:

  • You are self-employed and have correctly filled out a Schedule C within your 1040 tax return, displaying your self-employment income. 

  • You ran an operating business on February 15, 2020.

  • You meet both the requirements listed above.

  • The United States is your primary residence. 

Also read: How to Review Your Paychecks Before Filing Income Taxes

How Can I Calculate the Maximum Loan Forgiveness Amount?

The maximum loan forgiveness amount available for self-employed individuals was $20,833. This was determined by setting a maximum self-employed income of $100,000, which equates to a monthly income of $8,333. 

Since the self-employed PPP loans were based on a 2.5 times monthly income, this results in the following sum:

  • $8,333 × 2.5 = $20,833

Since this is the maximum amount of loan that could be borrowed, this is also the maximum loan forgiveness amount for sole proprietors and self-employed individuals.

Also read: A Full Guide on How to Calculate Income Tax On A Pay Check

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Applying for PPP Loan Forgiveness

Now that you have determined whether you qualify for PPP loan forgiveness, you will need to send in your application. The best way that you can do this is via the SBA’s Direct Forgiveness Portal which allows you to submit your application electronically. You will need to fill in some basic information, although most of it will already self-populate from your initial application. 

Another way that you can apply for PPP loan forgiveness is through your lender by filling out one of the following forms: Form 3508, 3508S, or the EZ application. The EZ application takes the longest to complete despite its name. 

Form 3508S is ideal for those who have either received a loan that is less than $20,833 or those who have received a loan larger than $20,333 but no more than $150,000 in instances where their PPP loan has covered an employee payroll as well as their own salary. 

Approximately 68% of self-employed PPP loan recipients would fall into this category and is ideal because it doesn’t require a lot of documentation and fewer calculations. 

This is how you need to apply for PPP loan forgiveness:

  1. Fill out your basic business information such as the business's legal name, what name the business trades as, and the address among more. 

  2. Listing your PPP loan information such as the loan amount, the loan number, and lender among more.

  3. Listing the amount of PPP loan you wish to have forgiven.

  4. Initial the correct boxes with your initials to ensure that you are not committing fraud. 

  5. Sign and date the form before you send it.

Filling out the EX loan application is a bit more complicated and time-consuming as it requires more information and documentation. Those who have taken out a loan that exceeds $150,000 personally or higher than $2 million with affiliates. 

As with the 3508S form, you will need to provide your business and loan information as well as clear documentation for the following payroll and non-payroll expenses:

  • Payments for business mortgage interest

  • Lease and rent payments

  • Utility payments

  • Any covered operations expenditures

  • Supplier costs

Now you need to calculate your loan forgiveness amount by taking the number of full-time employees when the loan was taken out, the number of full-time employees when completing your forgiveness application, and your complete payroll during the forgiveness timeframe. 

Once this is done, you will need to make sure that you fill out the form as honestly and accurately as possible and initial every paragraph. If you make a false statement then you could face legal trouble leading to potential fines or imprisonment.

Lastly, Form 3508 is for those who have received a loan that exceeds $150,000 and has had to reduce their full-time employees' wages by more than 25%. Due to the nature of the form and the criteria involved, this is the most timely option as you will need to begin like the others by providing your business and loan information before moving on to the calculations.

Due to the particular nature of the form, the amount of calculations that are required is what makes this the most time-consuming as you will need to clearly lay out where the loan money has been spent and why your employees’ salary and headcount has decreased so much. 

Also read: A Full Breakdown of W2 And 1099 Filing Specifications

calculator and paper


Can You Get 100% of the PPP Loan Forgiven?

One of the main benefits of the PPP loan is that up to 100% of the loan can be forgiven, but whether you qualify for full loan forgiveness is dependent on how the money is spent within the first 24 weeks of receiving the loan in your bank account. 

How Do I Make Sure My PPP Loan is Forgiven?

There are many ways to make sure that your PPP loan is forgiven, and it’s important to follow them as this will ensure that you have a better chance of qualifying for 100% loan forgiveness. Here are some tips:

  • Make sure you are using the money for eligible expenses as laid out in your loan contract.

  • Keep the employee headcount up as much as possible.

  • Make sure that you aren’t reducing your employee’s salary by more than 25%.

  • Keep as much documentation as possible.

  • Ensure you are constantly communicating with your lender

How Much Can I Pay Myself With a PPPLoan?

When it comes to paying yourself with a PPP loan, there is a limit as to how much you can take for your own salary. PPP loans can be used to pay salaries, but how much this is is dependent on how much you have received. 

There is a misconception that you can use your gross income from line 7 of a 2019 or 2020 Schedule C, but this is not the case. You need to take the valuation dictated on line 7 and then subtract lines 14, 19, and 26 which will provide you with your maximum. 

Bear in mind that the maximum salary you can pay yourself with a PPP loan is $100,000 so be sure not to exceed this number no matter what. 


In conclusion, you can qualify for PPP loan forgiveness provided that you can prove that your loan went on either your own salary or other non-payroll expenses including mortgage interest and rent payments. When it comes to PPP loan forgiveness, you need to make sure that you know how much of the PPP loan you are asking to be forgiven as well as ensure that you fill in the correct forms and are as detailed as possible. 

Paystubs are great for highlighting what tax you have paid and how much. Our paystub creator creates excellent high-quality pay stubs in an instant.

Frequently Asked Questions

Yes, eligible borrowers who have used the full amount of their first PPP Loan for authorized purposes can apply for a second PPP Loan, also known as a "Second Draw" PPP Loan.

PPP Loan funds can be used for payroll costs, including employee benefits, rent, mortgage interest, utilities, and other essential expenses required to maintain the business.

To apply for PPP Loan forgiveness, you must complete a Loan Forgiveness Application Form and submit it to your lender, along with the required documentation.

PPP Loan forgiveness for sole proprietors and self-employed individuals is based on 8 weeks' worth of 2019 net profit (up to $15,385), plus any eligible non-payroll expenses like rent, utilities, and mortgage interest.

Documentation required for PPP Loan forgiveness includes bank statements, payroll tax filings, payment receipts, invoices, and other documents that verify eligible expenses.

If your PPP Loan is not forgiven or only partially forgiven, any remaining balance must be repaid at an interest rate of 1% within the loan's maturity period (either 2 or 5 years, depending on when you received the loan).

A PPP (Paycheck Protection Program) Loan is a government-backed loan designed to help small businesses and self-employed individuals maintain their workforce and cover essential expenses during the COVID-19 pandemic.

Borrowers must apply for PPP Loan forgiveness within 10 months after the last day of their covered period, which is either 8 weeks or 24 weeks after receiving the PPP Loan.

The maximum loan amount for a PPP Loan is 2.5 times your average monthly payroll costs, up to a maximum of $10 million.

Sole proprietors, self-employed individuals, and independent contractors with a valid Social Security Number or Employer Identification Number are eligible for a PPP Loan.
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PPP Loan Forgiveness for Sole Proprietors and the Self-Employed
Samantha Clark

A Warrington College of Business graduate, Samantha handles all client relations with our top-tier partners. Read More

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