Contractor PPP Loan: Everything You Need to Know

The COVID-19 pandemic has hit businesses hard, and contractors are no exception. Fortunately, the government has introduced several initiatives to help small businesses recover and stay afloat during these challenging times. One such initiative is the Paycheck Protection Program (PPP) loan.

What is a PPP Loan?

The Paycheck Protection Program (PPP) is a loan designed to provide small businesses with financial relief during the COVID-19 pandemic. The loan is administered by the Small Business Administration (SBA) and is designed to help businesses keep their lights on and their employees paid during the pandemic.

The PPP loan was originally introduced in 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loan was designed to provide small businesses with a way to pay their employees and cover other essential expenses.

In 2021, the PPP loan was extended and expanded under the PPP Extension Act of 2021. The expansion made more businesses eligible for the loan, increased the maximum loan amount and provided more flexibility in how the loan funds could be used.

Who is Eligible for a PPP Loan?

To be eligible for a PPP loan, a contractor must meet certain criteria. Firstly, the contractor must have been in business as of February 15, 2020. Additionally, the contractor must have less than 500 employees or fall within the SBA’s size standards.

Contractors may also be eligible for a PPP loan if they are independent contractors or sole proprietors. Self-employed contractors who file a Schedule C on their tax return can also apply for a PPP loan.

How Much Can a Contractor Borrow?

The maximum amount a contractor can borrow under the PPP loan program is 2.5 times their average monthly payroll costs or $2 million, whichever is less. The payroll costs include salaries, wages, and benefits, and may also include rent, utilities, and mortgage interest payments.

How to Apply for a PPP Loan?

To apply for a PPP loan, contractors must go through an SBA-approved lender. The application process involves submitting a loan application form and supporting documentation, such as tax returns and payroll records.

The SBA has also introduced a streamlined application process for loans under $150,000, which makes it easier for contractors to apply.

What are the Loan Forgiveness Terms?

PPP loans may be partially or fully forgiven if the contractor meets certain conditions. To be eligible for loan forgiveness, the contractor must use the loan funds for eligible expenses such as payroll, rent, and utilities.

Additionally, the contractor must maintain their employee headcount and salary levels for at least eight weeks after receiving the loan. If the contractor meets these conditions, they may be eligible for loan forgiveness.


The PPP loan can provide much-needed relief for contractors struggling during the COVID-19 pandemic. By understanding the eligibility criteria, loan amounts, and loan forgiveness terms, contractors can make informed decisions about whether to apply for a PPP loan. Ultimately, the PPP loan can help contractors stay afloat during these challenging times and support their business operations in the long run.