[crossposted from the EA Forum]

Epistemic Status: I spent the past couple of days looking into this, but there is far more that I don’t know than that I do. I may be wrong about some of this, and this certainly has gaps and omissions. If you know something I don’t, or you think something here is wrong, please say so in the comments.

tldr: The US government is giving away several hundred billions of dollars to small businesses as part of COVID-19 stimulus. If you are an independent contractor who received income in 2019, you are eligible for (on average) $10,000 to $30,000. The process for applying for that money as an independent contractor is somewhat tricky, and so this post is to guide you through it.

We expect money to be allocated on a first come, first serve basis, and to run out fast, so we recommend that you follow these steps ASAP. From what we can tell almost all banks stopped accepting applications for the business-version of this program within 6 hours of opening their applications, so time is really of the essence here. For independent contractors this program starts on April 10th (tomorrow), for everyone else it started on April 3rd.

Peter Hurford made a post about this same program two weeks ago where he mostly talked about the opportunities for charities. This post is about the opportunities for independent contractors and sole proprietors, which should also include many grant recipients.

This post is broken into two sections, the first describes how to apply for a EIDL loan (likely worth at minimum something like $1000), and the second describes how to apply for the paycheck protection program (probably worth ~0.2 * your annual income for 2019).

EIDL program

What is an EIDL?

EIDL stands for “Economic Injury Disaster Loan”, and is described here.

While the term used is “loan”, the “loan” in question does not have to be repaid, making this effectively a taxfree grant.

In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid.

Small Business Administration (emphasis mine)

How to apply for an EIDL loan (~ 10 minutes of work)

To apply, just fill out this application on the SBA website.

The paycheck protection program

What is the paycheck protection program?

Here is a four-page government-issued fact sheet about the program. Here is a more readable summary by one of the companies that is issuing loans:

The Paycheck Protection Program (PPP) is a key section within the recently passed Coronavirus Aid, Relief and Economic Security Act (CARES) Act that allocates $349 billion for small business (< 500 employees) loans to support payroll and certain other expenses. Loans are available for up to 2.5 times of your average monthly payroll during the year preceding the application, with a maximum loan of $10 million. If employers maintain their payroll and use loan funds for allowed expenses like payroll, rent and utilities for the first 8 weeks after the loan is issued, the loan amount is forgiven. The PPP is retroactive to February 15, 2020.

You are eligible for an amount equal to [(yearly income for 2019) / 12] * 2.5 . For many independent contractors, that could be on the order of $10,000 to $20,000,

By default, this is a loan, which you are expected to pay back. However, 100% of the principle is eligible for loan forgiveness, so long as you spend the >= 75% of the total amount on payroll costs (i.e. pay the money to yourself). Given loan forgiveness, this is essentially a tax free grant.

You can apply for forgiveness of the loan 8 weeks after you receive it, and the process seems pretty simple. (According to some article that I read 2 days ago, but can’t find at the moment.)

This page has regular updates about the program.

Instructions for independent contractor applying to the Paycheck Protection Program (~ 1 hour of work)

The PPP loans are distributed by SBA approved lenders. You’ll have to apply through one of them to receive a grant.

If you have an existing business account with a bank, apply via your bank

This is the standard way to apply for a PPP loan. Unfortunately, most banks are only serving existing customers who have a business account with them.

If you do have a business account with a Bank, follow the instructions on your bank's website.

However, most banks will have a lending cap, which will be quickly filled, therefore you may want to apply via the methods under the “if you don’t have a business account” in addition to applying with your bank.

If you don’t have a business account

Since most of us will not have a business bank account, we’ll have to apply via other methods.

First, apply via Kabbage

You can currently submit a full application via Kabbage (a fintech startup). Given that this is a full application, and not merely an interest form, it is one of the venues that I am most optimistic about. (On the other hand, the fact that they have an open application, and have for several days, suggests that many people may have applied and are “ahead of you” in line, which is reason to be less optimistic.)

  1. Go to this site: https://www.kabbage.com/paycheck-protection-program-loans/, and fill out the application.
  2. Once you have applied they will ask you to upload some documents. This includes a picture of your driver's licence, a 2019 schedule C form from your taxes, any 1099-MISC you may have received, and payroll documentation.
    1. Note: you do not have to have filed your taxes to submit a schedule C. If you have prepared your taxes, but not filed, and you submit a schedule C, that is fine.
    2. Note: I asked one of Kabbage’s phone support people about the payroll info, given that that doesn’t have much applicability to me. He said to submit whatever info I had available,

[Kabbage’s phone support was pretty quick and helpful, so you might call them if you get confused.]

Second, apply via Fountainhead

Fountainhead is another lender that has a full application available right now. As near as I can tell, it is totally legal to apply for a loan from multiple lenders, so long as you don’t accept a loan from multiple lenders. (However, I am not a lawyer or an accountant, and I may be wrong about that.) Given that supposition, you may want to apply to multiple lenders, to increase your chances of actually securing a loan.

This link: https://www.fountainheadcc.com/apply-relief-loan/

Note: I think that “2019 Payroll Cost” should be equal to your “2019 Annual Gross Revenue”, or perhaps your “2019 Annual Gross Revenue” - the business expenses you declared on your taxes. I’m pretty sure that it shouldn’t be 0.

[Unvetted] Third, apply via NorthOne


I just found this one as I was preparing this post, so I haven’t gone through it myself, yet. They appear to have an open application form, however.

Fourth, express interest on all of these forms

All of the following are expressions of interest forms, instead of full applications, but if you fill them out, you’ll put yourself on a list, and the lender in question will contact you if/when they have capacity in their pipeline.

Each of these are single-page interest forms and it shouldn’t take more than 10 or 15 minutes to fill out all of them.

  • Celtic Bank
  • Live Oak Bank
    • They are focusing on current customers, but you can still apply.
  • US Bank
  • Umpqua Bank
    • They have “temporarily suspended” applications, but do have an interest form to fill out. It is unclear to me if you need to be an existing customer in order to be eligible.
  • First home bank
    • They have suspended applications, but you can apply to be notified if/when they reopen them)
  • Mechanics bank
    • They say that they are prioritizing folk that have an existing account)

Some additional lenders at which you might be able to apply depending on your circumstances

Lenders who haven’t opened (or reopened) applications yet, and recommend that you check back at their website regularly:

Banks with location based constraints (which might work for some of you?):

  • First United
    • Serving Texas and Oklahoma
  • Midwest Bank Centre
    • Their website says they are only serving their local area, but also, you just email them the application, so you can try it and see what happens, especially if you can say that you live in “St. Louis City, St. Louis County, St. Charles County, [or] Jefferson County.”

Moral considerations

There is a question of whether it's immoral to apply to this if you aren't one of the people who needs these stimulus funds the most. My current model is that many of us will be affected by the economic uncertainty of the upcoming recession – for example I expect OpenPhil, SFF, the LTF, and other x-risk/EA funders to see a substantially reduced funding capacity – and that I think it makes sense for you to apply. I also think many other individuals and businesses who will need the funds less than you do will apply, and that you do always have the option to later on donate an amount equivalent to the money you get from this.

[edit: Daniel Kokotajlo points out that the application asks you to certify that, "Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." For many of us that is untrue, and saying otherwise would be lying. See discussion in comments.]

How likely is this to pay off?

I don’t know.

I could try and assign a number to the probability that you will actually receive a loan/ grant from this process, but there is so much uncertainty in this whole thing, that I feel like putting a number on it would do little more than anchor you illegitimately.

If you insist, I think that if you fill out all of the above applications, sometime on April 10th, I think there’s something like a 1 to 10% chance of getting money from the EIDL, and a 10 to 40% chance of getting money from the Paycheck Protection Program. I pulled those numbers completely out of my ass, they are very likely to be overestimated or underestimated. and they are contingent on new information (like congress approving more stimulus money).

(some) Frequently Asked Questions

I’m an independent contractor and a sole proprietor. How can it be the case that there are different deadlines for those two categories?

I don’t know. It seems like confusing poorly executed logistics to me.

This page explains the technical nuance of the two designations, but it is true that they often overlap.

Should I count myself as “1” employee, or should I say that I have 0 employees?

From the little research that I did, I got mixed messages about this, but my best guess is that you should put “1” for “number of employees” questions. It is possible that I am mistaken.

[Please ask any questions that you might have about any of this, as well as offer any corrections, confusions, or additional info that you may have in the comments. I'm figuring this out on the fly, as much as anyone else is.]

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I got nervous when I heard people were applying for forgiveness, so I looked into it. Here's what I found

  • Some banks are accepting forgiveness applications right now, my bank isn't and is working on their own submission process. I discovered this by googling "[my bank] PPP loan forgiveness".
  • The absolute drop dead deadline before you will be charged interest is 10 months after the period the loan covers (source)
  • Sample application and instructions here

A friend mentions Divvy and lend.io as 3rd party brokers who seem to be moving fast.

I think the "moral considerations" section currently understates the moral concern.

It's not just that there are other people who might need the funds more. It's also that applying for the funds involves lying. I'd love to be wrong about this, so please correct me if I am, but doesn't the application require you to certify that the current crisis renders these funds "necessary to continue current operations?" Seems like anyone who has enough funds to last a few months would be lying if they certified that. :/

And in particular, if you plan to donate the funds, then clearly they aren't necessary for you to continue your current operations!

I went to double check, and you are correct, one the statements that you are asked to initial in the government-issued paper application, is,

Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.

Depending on your circumstances, this may or may not be true, and therefore, agreeing may or may not be a lie.

I'm going to add a note about in the main post.


When I read that sentence, these are the things that strike me, in order.

  • 1. The word "necessary" seems like a knock-down: I have savings, these funds are not strictly necessary for me (the person Eli Tyre).
  • 2. But it also says "current economic uncertainty." That is to say, I'm applying for money because I don't know what's going to happen over the next few months. That is true, in so far as I don't know how long this disruption will last, and how long my savings will hold out. If I ran out of money to pay rent, then I would have to figure something out, which would probably involve ceasing some of my current activities to do something that gives me income.
    • Does that mean that the economic uncertainty does make these funds necessary? My first order answer to that is the key question is "would 2.5 months of income make the difference between continuing doing the work I'm doing and finding income somehow?" I think that that is pretty unlikely. I have more than 2.5 months of runway.
  • 3. But maybe most importantly, there's the phrase "the ongoing operations of the Applicant": What are the ongoing operations of the business entity "Eli Tyre"?
    • Well, for instance, I contract-teach at CFAR workshops. I won't be doing that in the near future, regardless (because this is not a season for putting 50 people from all over the world in a house together for 4.5 days). The "Eli Tyre" entity is definitely going to miss the income that would come from those activities.
    • Naively, I might compare that situation to a restaurant or tailor, who is not getting any business right now, because their would-be-customers are sheltering at home. They probably still have expenses to pay, particularly payroll expenses, and that is exactly what this situation is supposed to cover. What is my equivalent of "payroll expenses"? Well, (effectively) the "Eli Tyre" business entity pays the individual Eli Tyre, gross revenues minus expenses. Does that mean that paying myself is one of the ongoing activities of the business entity "Eli Tyre"? I think, in that Sole Proprietors and Independent Contractors can apply at all, the answer is "Yes."

A lot of this is kind of confused because I'm forced to make a pretty artificial distinction between the unincorporated business entity "Eli Tyre" (that's why "the Applicant" is capitalized) and Eli Tyre the person.

It seems additionally confused by the fact that I have ceased much of my usual (paid) economic activity in order to do pro-bono work.

I guess I should talk with a lawyer.

Or do any of you have legal expertise?

I second the request for a lawyer. Whether or not I apply for these funds depends on what I think the legal interpretation of that passage is.

Not a lawyer, repeating the words of someone else who's not a lawyer.

I talked to my bank (a 3 state credit union) today, specifically asking whether I counted as my own employee. The representative implied the SBA itself didn't know, and if they did they hadn't shared the information yet. She also very strongly implied that as long as I filled out the forms in good faith and my supporting documents were accurate, I would not be punished for fraud.

But what does it mean to fill out the forms in good faith? Doesn't that depend on whether or not I think I'm lying? And doesn't that depend on what words like "current economic uncertainty renders... necessary to continue current operations... " mean? Like, obviously I could use the money. But is it necessary? I do have savings, so it seems like I could continue operations for a while just fine without extra money...

I recommend that you apply ASAP, talk to a lawyer, and then decline the funds if it seems like you shouldn't have requested them in the first place. There's a very limited window for getting money (which might already be passed). When actions are reversible (which they certainly are in this case, given that it is a loan, by default), but time sensitive, bias in favor of action.

But I recommend that you follow your moral compass over and above following my advice.

New relevant comments on the EA forum version of this post.

(Just to be clear, I'm considering the EA forum one to be the "canonical" version.)

As near as I can tell, it is totally legal to apply for a loan from multiple lenders, so long as you don’t accept a loan from multiple lenders. (However, I am not a lawyer or an accountant, and I may be wrong about that.)

FWIW, for the Kabbage website, you're supposed to check a box that says:

"During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program."

Yes. Receiving multiple loans is definitely illegal. But if one of them comes through, you should just stop doing anything on the others (or if need be, send the relevant lender an email saying that you are no longer eligible.)

However, 100% of the principle is eligible for loan forgiveness, so long as you spend the <= 75% of the total amount on payroll costs (i.e. pay the money to yourself).

The grammar for this sentence seems a little borked, so I wanted to double check: At most 75% of the money can be paid to yourself?

Nope. That was just a typo. It should read ">= 75%".

The Kabbage application says:

At least 75% of the loan proceeds must be used to cover payrolls costs in order to receive total loan forgiveness. This information will be verified when you request loan forgiveness.

Note: PayPal is now also accepting applications, which might be an option for many people: https://www.loanbuilder.com/ppp-loan-application

(While the link doesn't go to PayPal directly, it is linked from here, which makes me think it's legitimate)

I decided against applying for either of these. I'm self-employed with no other employees and I haven't currently lost any income. I may or may not in the coming months. I'm worried about the repercussions if I apply for this, accept the money, and then end up not actually needing it.