We’re hearing a lot about how small businesses with employees can leverage programs to help their employees through unemployment benefits with a COVID relief loan; or the Paycheck Protection Program (PPP), but what if you don’t have employees? Or are an independent contractor? Are you still eligible for loans or aid to keep your business going through this COVID-19 pandemic? What about unemployment for yourself?
The short answer is: yes, you may be eligible for SBA COVID relief loans. Or possibly for Unemployment. But you’ll need a few things to qualify.
The Economic Injury Disaster Loan
If you work as an individual contractor or a sole proprietor with no employees, you may be eligible for the Economic Injury Disaster Loan, which includes up to a $10,000 emergency grant that will be deposited to your bank account. These grants do not have to be repaid as long as funds are used for:
- Meeting increased costs to obtain materials unavailable from the your original source because of interrupted supply chains
- Making rent or mortgage payments
- Repaying obligations that cannot be met due to revenue losses
- Your payroll
You’ll have to be able to show that you have sustained economic injury as a result of coronavirus.
Paycheck Protection Program
Even if you don’t have employees, you may have yourself on payroll, and in that case, you may be eligible for a Paycheck Protection Program Loan (PPP), based on 2.5 times your average monthly payroll expenses. You can request forgiveness of the principal amount of the loan for the eight-week period after you receive if you use it to cover payroll (including your own, if you don’t have employees), as well as interest on mortgage, rent, and utilities. (Note that non-payroll expenses cannot exceed 25% for purposes of loan forgiveness.)
As part of the loan application process, you may be asked to provide your tax returns or 1099-MISCs to prove your payroll expenses.
Can I Get Both?
You can apply for both the PPP loan and an EIDL as long as you don’t use the funds to cover the same expenses. You may be able to get both if, for example, you use the PPP funds to pay your own payroll and the EIDL to other permitted expenses such as to pay vendors that you can’t pay due to revenue loss.
What About Unemployment?
It’s not a loan, but here’s a financial resource that could alleviate some of the strain right now: the Pandemic Unemployment Assistance Program (PUA). The good news is, even if you’re self-employed with no employees, you may be eligible to receive benefits. That’s not what unemployment benefits guidelines cover under more normal circumstances, but Congress has added
If eligible, you could receive $600 a week from the federal government, for up to four months. This is in addition to any unemployment benefits available at the state level. This may not be close to what you normally bring in, but every little bit helps.
To be eligible for these expanded unemployment benefits with a COVID relief loan under the CARES Act you must certify that you are otherwise available and able to work but can’t because:
- You’ve been diagnosed with COVID-19 or are experiencing symptoms and seeking a medical diagnosis
- Someone in your family has been diagnosed with COVID-19
- You are providing care for a family member or a member of your household who has been diagnosed with COVID-19
- Your child is unable to attend school or another facility that is closed as a direct result of the coronavirus public health emergency, and you are unable to work because you must care for the child
- You can’t get to work because of a quarantine imposed as a direct result of the COVID-19 public health emergency or because you have been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- You have become the breadwinner or major support for your household because the head of the household has died as a direct result of COVID-19
- Your business is closed as a direct result of the COVID-19 public health emergency
- You are self-employed, are seeking part-time employment, do not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under State or Federal law or pandemic emergency unemployment compensation
Keep in mind, you may not qualify for unemployment benefits if you have the ability to telework with pay or are receiving paid sick leave, regardless of whether you meet the above qualifications.
It’s clear that the folks on Capitol Hill are aware of the impact COVID-19 is having on America’s small businesses. If you’re suffering, take advantage of these programs that are designed to help businesses like yours.
Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.
This article was originally written on April 6, 2020.