This is general advice and all contractors interested in the programs should contact their local bank and/or accountant to go over the details of such options available to them.
We wanted to share with you some important facts regarding the CARES Act that was passed 3/27/2020 that can help our Independent Contractors in this Coronavirus crisis. Many of us have been impacted by the slow down our economy that this virus has caused. The CARES Act has two loan programs that we strongly encourage our ICs to look into and apply for if they meet the criteria. The two loan options available are: Paycheck Protection Plan (PPP) and Economic Injury Disaster Loan (EIDL). These programs vary widely and should be thoroughly discussed with your accountant or bank to make sure which of these options you qualify for.
The goal of the PPP is to help small businesses (Independent Contractors) maintain and pay themselves and employees during the next two months, while the American economy is essentially shut down. ICs can apply for a loan through the Small Business Administration (SBA). They will lend 2.5 times the average monthly payroll (excludes employees who were being paid 100,000 or more) of the preceding year prior to the date of the loan. For ICs, and self-employed individuals payroll is determined as:
“The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as prorated for the covered period. Loan proceeds may be used to pay for costs of the workforce and keeping the doors open, including payroll costs, costs related to the continuation of group health care benefits, mortgage payments, rent, utilities, and interest on any other debt obligations that were incurred before February 15, 2020.”
1) To apply, you will need to complete the SBA application. We have attached a sample one to complete.
2) You will also need copies of an IRS Form 941 - This is the form you or your accountant would file showing employment taxes paid/withheld. If you don't have these, gather your tax returns and 1099 to show what kind of revenue you generated.
3) If you get paid as a corporation, LLC or other company type, have the documentation for that company ready. This would be the SS-4 (which shows your EIN number), your state incorporation paperwork, and any other company documents (by-laws).
4) Start with a bank that you do business with first - if you don't have a bank look in your community for a small bank that has SBA experience. Also, keep in mind that the interest fee can ONLY be 1% for this loan, and the bank cant charge fees. If someone is charging you a fee, there is something wrong - same thing if there is a higher interest rate (than 1%).
5) The PPP Loan is guaranteed by the government - meaning you don't have to guarantee it.
6) The great thing about the PPP Program is - if you use the funds for payroll costs and document it appropriately, the loan proceeds may be forgiven (check with your bank and accountant on how to do this).
This loan advance will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties. 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.
The SBA’s Economic Injury Disaster Loan provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic. This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19.
The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.
To read more on the Small Business Administration loan program go to: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options .
This is general guidance we have received from various trade sources, and is not intended to be legal/financial advice. These plans are changing rapidly, so it is important that you talk with your banker/accountant as to the terms of the programs to make sure it is appropriate for your situation.
We also want to convey our gratitude to all our Owner Operators braving the virus with every mile turned to keep our supply chains open.
Thank you for everything that you do to keep this country moving.
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