The Paycheck Protection Program (PPP) was a lifeline for many businesses during the pandemic, but not everyone qualified.
If you applied or are considering applying, it’s important to know who is not eligible for a PPP loan.
Certain businesses, individuals, and organizations were automatically disqualified based on their financial situation, legal status, or past actions.
For example, if your business was not operational before February 15, 2020, or if you had felony fraud convictions, you were likely ineligible.
PPP loans were designed to help small businesses keep employees on payroll, but strict guidelines filtered out certain applicants. Even self-employed individuals, freelancers, and nonprofits had to meet specific criteria.
We’ll cover the most common reasons for ineligibility, how audits work for smaller loans, repayment rules, and whether you can still apply today.
Let’s clarify who missed out—and why.
What Makes You Ineligible for PPP?
Some businesses and individuals did not qualify for PPP loans based on specific rules set by the Small Business Administration (SBA).
You were ineligible if:
1. Your business is not based in the U.S.
PPP loans require operations in the U.S. and majority ownership by U.S. citizens or lawful residents.
2. You’re involved in illegal activities
Businesses engaged in cannabis, gambling, or adult entertainment were excluded.
3. You have a felony record
If you have at least 20% ownership in the company and were convicted of certain felonies within the past five years (or ever, for financial fraud).
4. Your business is publicly traded
Only private companies qualified. Publicly traded firms were ineligible.
5. You’re a household employer
Nannies or housekeepers paid via Form 1099 couldn’t apply.
6. You’re a loan issuer or financial services firm
Banks, lenders, or insurance companies were excluded.
7. Your business is inactive
Companies not operational before February 15, 2020, couldn’t apply.
8. You were behind on federal loans, including SBA loans, and defaulted within the last seven years.
9. You had no employees and no self-employment income.
10. You were a lobbying or political organization.
11. Your business received other PPP loans that exhausted the available funding.
12. The SBA also disqualified businesses that exceeded employee limits or had conflicts of interest with government officials.
Who Is Not Eligible for a PPP Loan If Self-Employed?
Self-employed individuals, freelancers, and independent contractors could apply for PPP loans— if they met these criteria.
You’re ineligible if:
- No 2019 or 2020 tax filings: You needed a Schedule C (Form 1040) showing self-employment income..
- Your net profit was $0 or negative: If your 2019 Schedule C showed a loss, your loan amount would be $0.
- You operate a multi-owner business: Partnerships need to apply as a business entity, not as individual partners.
- Your primary business location is your home: This wasn’t a deal breaker unless you couldn’t prove business expenses.
- You didn’t file taxes for self-employment income.
- You were only a contractor with no business income.
- You were already receiving unemployment benefits.
- You started your business after February 15, 2020.
Even if you were self-employed with no employees, you could apply if you had net profit in your tax filings.
Will PPP Loans Under $150,000 Be Audited?
Yes, but the level of scrutiny varied.
Loans above $2 million were automatically audited meanwhile loans under $150,000 were subject to random audits.
Here are a few things to note:
- Forgiveness isn’t automatic: You still had to submit a forgiveness application.
- Audits are possible: The SBA reserves the right to audit any loan, regardless of size.
- Keep records for 4-6 years: The SBA may request payroll reports, tax forms, or expense receipts.
Most small loans faced minimal scrutiny, but errors or fraud could trigger a review.
Can I Get a PPP Loan If I Have No Employees?
Yes, but only if you had self-employment income.
- A sole proprietor with self-employment income (proven via Schedule C) is eligible.
- An independent contractor or gig worker with a 1099 income is eligible.
- A single-member LLC filing taxes as a sole proprietorship is eligible.
If you had no payroll expenses and no self-employment earnings, you were ineligible.
Your loan amount was based on your net profit divided by 12 and multiplied by 2.5.
Can I Find Out If Someone Received a PPP Loan?
Yes. The SBA released detailed data on all PPP loans over $150,000, including:
- Business names
- Loan amounts
- Lender names
- Jobs reported
For loans under $150,000, only aggregated data (not individual names) was shared.
If you suspected fraud, you could report it to the SBA or the Department of Justice.
Do PPP Loans Have to Be Paid Back?
Most PPP loans don’t need repayment if you use the funds correctly.
To qualify for forgiveness:
- Spend at least 60% on payroll.
- Use the remaining 40% on eligible expenses (rent, utilities, mortgage interest).
- Maintain employee headcount and wages during the covered period.
If you didn’t meet these terms, the loan converts to a 1% interest loan with a 2–5 year term.
Loans that were fraudulently obtained could lead to criminal charges.
Can a Non-Profit Get a PPP Loan?
Yes, but only if it met SBA guidelines.
- 501(c)(3) and 501(c)(19) organizations were eligible.
- 501(c)(6) organizations (like chambers of commerce) became eligible in later rounds.
- The non-profit had to be operational before February 15, 2020.
- It had to have 500 or fewer employees.
- Religious organizations could apply, but lobbying groups were ineligible.
Non-profits had to prove they used funds for payroll and operating expenses to get forgiveness.
What Is the Average PPP Loan Amount?
PPP loan amounts vary, but here’s a breakdown:
| Business Type | Average loan Amount |
|---|---|
| Sole proprietor | $10,000 to $20,000 |
| Small business (< 10 employees) | $50,000 to $350,000 |
| Medium business ( 10 – 50 employees) | $500,000 to $1M |
| Large Business (50+ employees) | $2M+ |
Your loan amount depended on payroll costs and business income.
Can You Still Apply for PPP Money?
No. The PPP program closed on May 31, 2021. All funds have been allocated. However, loan forgiveness applications are still open.
Alternatives today include:
- SBA 7(a) loans
- Economic Injury Disaster Loans (EIDL)
- State-specific small business grants
If new relief programs become available, they will be announced through the SBA.
Conclusion
While the program has ended, understanding these rules can prepare you for future relief opportunities. If you’re repaying a PPP loan or seeking alternatives, always consult a financial advisor or tax professional to avoid missteps.
