8 PPP Myths

Not sure if the Paycheck Protection Program (PPP) is right for you? Even as it’s extended from eight weeks to 24, there are a lot of PPP myths floating around. Don’t let these myths stop you from getting the loan your business needs. My partners at Bench have put together a short video busting the most common PPP myths. Check it out.

Here’s a summary:

PPP MYTH #1: There’s no point in applying

The PPP is definitely worth applying for. A lot of small business owners applied for the first round of PPP funding, never heard back from their banks, and gave up. While it’s true that overwhelming demand has slowed down some banks’ approval processes, that doesn’t mean you should give up on PPP. In fact, it’s now easier than ever to apply.

The SBA is working with financial technology (fintech) companies to make PPP applications more available en masse. You can apply for PPP online through one of these companies, without ever having to leave your home. And you don’t need to worry about your application falling through the cracks. If you have already applied for PPP through a bank but haven’t heard back, you can apply again through a different institution. (One exception: If the bank gave you an etran number, the funds have already been committed to you. Any additional applications will be automatically rejected.)

Bench has made it easy to apply for PPP through popular online lender BlueVine. The Bench and BlueVine PPP page walks you through the process, complete with videos, explaining each document you need to supply.

PPP MYTH #2: Only big businesses are receiving PPP loans

Small businesses qualify for PPP every day.

Early during the first round of funding, application requirements changed frequently, and small businesses were struggling to meet them. In some cases, smaller businesses may have been passed over for loans, especially as the fund began to run out. The second round has corrected many of those problems. Larger businesses are less eligible, meaning small businesses have a better chance at approval. And a portion of second round funding was given to smaller local banks, in order to make it more accessible to small businesses.

PPP MYTH #3: All the funds are gone

This is 100% false. The mad rush of PPP’s early days are over, and there’s plenty of funding to go around. PPP still has $150 billion available across both rounds of funding. So take your time to fill out a good application, include all necessary documents, and apply.

PPP MYTH #4: If you don’t have payroll you aren’t eligible

You do not need payroll in order to qualify for PPP. If you’re a self-employed sole proprietor or partnership member, you can still qualify for PPP. The term “Paycheck Protection Program” is misleading, in this case. You don’t need to write paychecks to get covered. When you apply, your loan amount—and forgiveness—will be based on your 2019 net income, as reported on Schedule C of your tax return.

PPP MYTH #5: PPP does not apply to contractors

Companies cannot pay you, a contractor, using their PPP funds. However, you can still get PPP funding. Here’s why. Early on, companies were allowed to use PPP funding to pay contractors. That changed during the first round, and now they can use it only to pay employees. There’s a reason for that: You qualify for your own PPP. If you’re self-employed, then the government automatically considers you a sole proprietorship. So you can apply for PPP funding for your business. Your loan amount, and forgiveness, well be based on your prior income as reported on 1099-MISC forms.

PPP MYTH #6: Forgiveness won’t apply to my business

Even if you don’t qualify to have all your loan forgiven, you may get a portion of it covered. PPP forgiveness isn’t a binary—forgiven vs. unforgiven. It’s a sliding scale. It’s worth applying, because that portion you do have forgiven is still a great resource—essentially, a tax free grant from the government. The portion you have to pay back isn’t expensive, either. Interest is set at 1% over two years, with the first six months deferred. It’s still an incredibly cheap small business loan.

PPP MYTH #7: PPP could harm my credit or trigger an audit

PPP does not require a credit check, so applying won’t harm your score. Also, while the rules may eventually change, for now the government is saying they won’t audit anyone who gets a PPP loan of less than $2 million.

PPP MYTH #8: If you get EIDL, you can’t get PPP

You can receive both the Economic Injury Disaster Loan (EIDL) and PPP. In fact, the two are designed to be used together.  If you’ve already received EIDL, you need to report the amount when you apply for PPP. This will affect how much you’re qualified for, and how much you’re forgiven. Don’t let having one loan influence your decision to apply for another, other than being sure to accurately report the amounts when you do apply. One more guideline: Be organized about how you use EIDL and PPP. Use each to cover the expenses they’re designed for. For instance, don’t use EIDL to cover payroll when you could use PPP instead. Expertly prepared books will increase your chances of receiving PPP funding and forgiveness. Connect with the pros at Bench who can help you get your books taken care of, so you can take back control of your business.


  1. Sharon McDonald

    Hi Mark,

    As always thank you for the wealth of knowledge. I have a question in regard to our corporate structure and how we as partners are paying ourselves to collect payroll utilizing PPP funds. We are an LLC taxed as a partnership, we received PPP for assistance for payroll, rent, etc. Obviously, we are in need of income for our own personal expenses. Typically we took owner draws and I believe we had a joint 1040 issued last year by our CPA (we’re married, 2018 return). We (partners) have added ourselves to payroll to collect a paycheck (like all of our employees) in hopes of using PPP for ourselves. Should we consider converting our company over to an S-Corp now that we are paying ourselves via payroll, is it okay to leave as LLC taxed as a partnership? And should we do anything prior to filing? I will be asking my CPA as well but always find your page to be amazingly insightful and helpful. We obviously want to utilize the PPP funds and hopefully, our payroll will be included in the grant amount. Thank you!

    • Mark

      Hi Sharon! Typically LLC owners would not be on payroll. They would just take owners draws or guaranteed payments. I would switch to an S corp if it made sense for the tax savings on self employment tax, but not necessarily just to put yourselves on payroll. I belive that your LLC should still qualify for the PPP forgiveness based on your distributions.

      • Sharon McDonald

        Thank you as always!! Hope you and your family are well!


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