Nearly 900,000 people filed for unemployment last week, as the U.S. jobs market continues to struggle. Self-employed people and independent contractors are currently eligible for unemployment under the Pandemic Unemployment Assistance (PUA) program, but as many business owners prepare to apply for the Paycheck Protection Program (PPP), which is opening for many lenders on Tuesday, you may be wondering whether unemployment and the PPP can be combined. Here’s what you need to know, based on our current understanding of SBA guidance (subject to change as the SBA releases more information).
Can You Get Both Unemployment and the PPP?
You can take advantage of both unemployment benefits through the PUA and funding through the Paycheck Protection Program, but not at the same time. As the PPP’s name implies, the program was designed to keep workers employed. If you receive a PPP loan, you will need to report the money you receive from the PPP as income to your state’s unemployment agency. That will likely render you ineligible for unemployment. Once you spend your PPP, you could go back on unemployment if your business still isn’t open.
Unlike the PPP, you can combine the EIDL grant with unemployment, as long as you don’t use the grant to pay yourself.
Which Program Is Right For You?
Since you can’t use both unemployment and the PPP, how should you decide which program to use? Here are some questions to consider when you are choosing whether to use unemployment or the PPP.
Do You Still Have Some Revenue?
If your business is still bringing in some revenue and isn't completely shut down, you should apply for the PPP rather than unemployment. If you are still earning money, your state’s unemployment department will reduce your unemployment benefits based on the amount that you earn. The PPP, however, is not dependent on the amount that your business brings in as long as you meet the eligibility requirements; even if you are still earning revenue, you will still be able to receive 2.5x your usual monthly payroll.
Do You Need Help with Other Expenses?
The PPP can be used to cover some other expenses for your business besides paying yourself and employees, like rent and utilities. If you need help with these expenses, the PPP is a better option for you than unemployment. 60% of the PPP must be used toward payroll for it to be forgiven, but the other 40% can be used for rent, utilities, health insurance for employers and employees, business expenses, operating costs and property damages.
You can learn more about the latest PPP news, lenders and distribution with the Skip App, which you can download at TrackPPPLoan.com. We will even have partner lenders right on the app starting next week.
📌 Disclaimer: This is for illustrational purposes only and not to be construed as tax, accounting, or legal advice. Work with your lender further if you have questions.