Freelancers have just a few weeks left to apply for a PPP loan. Here's how one writer did it

Freelance writer Lilly Dancyger shares what she learned about getting a PPP loan, even though her business wasn't registered as an LLC.

Lilly Dancyger

I've been a freelance writer for almost 10 years. But I don't have an LLC or any official entity for my business, and I don't keep the most meticulous books, so I didn't think I would be eligible for a PPP (Paycheck Protection Program) federal loan.

But it turns out I was, and you may be too. 

The deadline for the current round of funding is August 8, so if you're a freelancer who could use an income boost due to the pandemic-related economic downturn, here is what you need to know to quickly prepare your application.

I'm not a financial advisor, and my advice may not apply to all freelancers, but this is what I figured out while navigating the PPP application process on my own.

Many freelancers are considered sole proprietors 

If you're a freelancer who filed a Schedule C with your 2019 tax return, you're technically the sole proprietor of a small business, even if you haven't incorporated. That means you're eligible for these funds, which have been designated to cover payroll costs, because "owner compensation" counts as a payroll expense. 

For freelancers, your income from freelancing is all owner compensation. That means you could receive 10 weeks' worth of income, as determined by your 2019 tax return, as a loan, and eight weeks' worth could be eligible for forgiveness, meaning you wouldn't have to pay it back, ever. 

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You may need an 'alternative lender'

The first challenge for freelancers applying for a PPP loan is finding a lender. Most banks will only take applications from existing clients with business accounts. If you have a business checking account, great: Search "PPP" + "[your bank's name]" and you'll find information about their application system, and most likely a phone number for a liaison at the bank who can help you apply. But if, like me, you don't have a business checking account, you'll need to go through an "alternative lender."

You can find a list of alternative lenders that are approved by the Small Business Administration (SBA) through the U.S. Chamber of Commerce site

Each one has a slightly different application process, but here's a tip: You are allowed to apply with multiple lenders simultaneously to increase your odds of being approved. Just make sure you withdraw all pending applications as soon as you get an approval, because you can only receive one PPP loan. 

I applied with two of those lenders. BlueVine rejected me and Kabbage approved me. But I've heard from several freelancers who were approved by BlueVine, a few of whom were rejected by Kabbage, so try a few and see what works best for you.

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Make sure you have your paperwork in order

You'll need a copy of your 2019 1040 Schedule C to calculate your loan amount and to submit with your application as verification of your income and freelance status. 

You'll also need any 1099s you received from businesses that paid you as an independent contractor, a February bank statement, an invoice or other piece of paperwork to verify that your freelance business was in operation before February 15, 2020, and front-and-back copies of your driver's license or other state ID.

To calculate your loan amount, find line 31 on your 1040, your net income from freelancing. Unfortunately, if you were in the red last year and this number is negative, you won't qualify for a PPP loan. If this number is more than $100,000, reduce it to $100,000, which is the cap. Divide that number by 12 to determine your average monthly payroll cost. 

As a freelancer with no employees or subcontractors, your income from freelancing is your payroll. If you do have employees or subcontractors, your calculations will be a little different. Depending on which lender you apply with, they may just ask for this average monthly cost and then calculate the loan amount for you, but if they ask you to fill in the total loan amount you're applying for, that should be that monthly average times 2.5. So: [total from line 31] ÷ 12 x 2.5.

Lock down any remaining details 

A question about my business inception date was one spot where I got a little tripped up, because since I never incorporated, my business is just me. After talking with some other freelancers, I listed January 1 of the first year I made a significant amount of my income from freelancing, and that worked for these purposes. 

The application may ask for your NAICS code, which is the classification for what type of business you have. That code is on your 1040, right underneath your SSN (line B).

Under documents, the application may ask for something to verify that your business was active as of 2/15/20, which is the beginning of the period of time eligible for PPP funding. The application I used listed things like incorporation papers as examples of what could be used there, and I thought this meant I would be ineligible as a freelancer without an LLC or S Corp. 

But when I spoke to a Kabbage customer service representative on the phone, they told me I could use any invoice dated before 2/15/20. Just to be safe, I used the most recent one I had that was still before that date.

The whole process took less than a week, total, including a few days of research. It took about 24 hours for the initial approval and once I uploaded the invoice, the loan was officially approved and processed the next day. The PPP Funds were in my account five days after that, and now I'm resting easier, no longer afraid that fewer freelance assignments during the pandemic will put me into debt. 

Lilly Dancyger is the author of the memoir "Negative Space" and the editor of the anthology "Burn It Down." Her writing has appeared in The Washington Post, The Atlantic, Psychology Today, Rolling Stone, Playboy, and more. Find her on twitter at @lillydancyger 

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