If you’re a small business owner, sole proprietor, or an independent contractor, you , or PPP loan. The purpose of this loan is to help keep your business operating, especially if it means being able to keep paying your employees (yes, yourself too!). Many people don’t realize they might qualify for these loans, particularly immigrants to the United States.
At Remitly, we know that a fair number of our customers are business owners or independent contractors. Immigrant-owned businesses help keep the economy afloat. According to New American Economy, a bipartisan research and immigration advocacy organization, 3.2 million immigrants in the United States ran their own businesses in 2019.
The PPP loans are designed to help during the COVID pandemic, similar to the stimulus check program; these loans, however, work a little differently. While they must be paid back, in many cases the loan proceeds can be forgiven-as long as you can prove the money went to qualified expenses. Even if you’re not sure if you’re eligible, it’s a good idea to find out.
Let’s take a look at exactly what the First Draw PPP loan is, how to know if you qualify, and your next steps.
What is the Paycheck Protection Program?
The Paycheck Protection Program is meant to help small businesses and those who are considered self-employed to ensure that their employees are still on the payroll.
The loan itself has a 1% interest rate but can be forgiven if the business meets all criteria, including using the funds for eligible expenses and meeting employee retention requirements.
What Can I Use the PPP Loan For?
The list of eligible expenses has expanded to include more than just rent, utilities, and payroll costs. Now you can use your loan proceeds to cover any property damage costs that occurred in 2020 that weren’t covered by insurance.
- Accounting software;
- Purchasing goods essential to your business;
- Personal protective equipment for yourself or employees; or
- Improvements to the property to ensure compliance with CDC guidelines.
Adam J. Williams, Esq., founder of Rust Belt Business Law in Erie, Pennsylvania, says that the First Draw PPP loan can also be forgiven if you use the proceeds for non-payroll costs.
“In order to qualify for total forgiveness of the PPP loan, at least 60% of the loan proceeds must be spent on payroll that is reported through W-2 wages,” he says. “40% or less of the proceeds may be used on qualifying non-payroll costs.”
However, Williams stresses that there may be limits on how much you can use for owner payroll or for individuals who make over $100,000 per year. If you receive a First Draw PPP loan and want to qualify for loan forgiveness, it’s best to consult an accountant who specializes in helping small businesses for assistance.
If you don’t qualify to have your loans forgiven, you will have to pay back the loan within five years at a 1% interest rate. Your payments will be deferred for 10 months after the end of the covered period, which is anywhere from eight to 24 weeks.
How Do I Know if I’m Eligible for the First Draw PPP Loan?
“As long as you’re a lawful resident, you can apply for the loan,” says Jacob Dayan, Esq. CEO and co-founder of Community Tax in Chicago, Illinois. “The Small Business NJ title loans Association has a list of who can qualify.”
Lawful permanent residents are those who are authorized by the U.S. government to be able to accept offers of employment and live permanently in the country. This means that if you’re a green card holder, you’re eligible to apply for the First Draw PPP Loan.