I am a small business growth expert and here to help small business owners with all of the training, financial skills development and revenue growth strategies they need in order to have healthy, viable businesses.
There is a lot of information so this message is quite long. However, I have tried to break it down into useful chunks while at the same time answering so many of the questions that are coming my way.
The current economic crisis that has resulted due to the COVID-19 pandemic has and will have a long-lasting impact on those I serve. I want each and every one of you have the most current and relevant information and to all of the available resources and I am doing so but need to add the following disclaimer:
I am a small business expert but not licensed to give legal, accountancy, or tax advice. I provide general information about matters relating to business management, operations and affairs for informational purposes only. For all legal, accountancy or tax matters you should seek assistance from either a qualified lawyer or tax professional as they relate to those issues. While I make every effort to ensure that the content of this information is accurate, adequate or complete, I cannot and do not represent or warrant its accuracy, adequacy or completeness. To the extent permitted by law, your reliance on this information is at your sole discretion and I shall not be held responsible for any loss or damage, including indirect or consequential damages arising from or in relation to the use of this information. Nothing contained herein shall be construed to be legal, accountancy or tax advice.
That said here you go:
The CARES Act includes 3 Distinct Programs that you want to access if needed:
- Paycheck Protection Program (PPP)
- Economic Injury Disaster Loans (EIDL)
- Pandemic Unemployment Assistance (PUA)
- For California businesses there is also a newly released micro-lending program.
I am going to provide a brief overview for each of the CARES Act programs and provide additional content through attachments and links. For the new California micro-lending program I don’t have much information yet other than the link which will be provided.
FIRST – I want to give some clarity on how they seem to be using the terms:
Small business – Can be either a corporation, an LLC or sole proprietor.
Independent contractor, 1099 contractor or self-employed – Are those doing business without a fictitious business name (FBN).
The confusion for some is that a sole proprietor, a single-member LLC, an independent/1099 contractor or someone who is self-employed are frequently not treated differently at other times and all receive 1099’s if they provide services. Anyone who owns a business is by definition self-employed no matter what their legal entity status. Got it? Is your head spinning yet? Wait, it will be. Haha
PPP (Paycheck Protection Program):
The basics are that there is $349 billion being made available to companies (corporations and LLCs) and sole proprietors and self-employed who are eligible to receive a forgivable loan of 2.5x your average monthly payroll (up to $10m), subject to some restrictions and compliance requirements.
The loan will not require a personal guarantee from the business owner.
The loan will be forgiven if you spend it all in eight weeks for the allowed uses (75% payroll and 25% other allowed) and are able to prove to the bank issuing the loan that you did so. The amount of the loan amount forgiven will be reduced by layoffs or certain salary reductions. Keep your bookkeeping records in order.
You can apply for this loan even if you don’t have any employees other than yourself. If you are a corporation/LLC paying yourself through payroll you will use your average monthly payroll figures for 2019. If you are a sole proprietor or self-employed you will use the net income number from 2019 (divided by 12).
The application will be submitted to a bank that has agreed to process the applications. Small business (either corporations, LLCs or sole proprietors) were able to begin applying on April 3rd but some of the banks couldn’t get ready in time. Applications from self-employed and independent contractors are to set to begin on April 10th.
You need to fill out the PPP loan application. I have the newest pdf fillable form and the fact sheet available. Please click the links to get them. According to the instructions as of April 3rd, you are to add the EIDL $10,000 advance to your PPP application.
EIDL (Economic Injury Disaster Loans):
They have streamlined the application for this loan so that it takes only a few minutes (instead of 2 hours). It provides a provision to request a $10,000 advance on the loan. It is expected that this advance will be granted even if you don’t qualify for the loan. Also, it is anticipated that this $10,000 amount will be forgiven, meaning you will not be required to pay it back. I would note that it is possible this amount will be pro rated but I currently have no information about if this will be true. This application will also be processed by your bank.
Those businesses eligible cannot have more than 500 employees (with some exceptions) and can also include non-profits.
The link for the EIDL is: https://covid19relief.sba.gov/#/
PUA (Pandemic Unemployment Assistance):
PUA is a weekly payment of $600 in addition to the unemployment benefits to which an individual is entitled. For a business owner who is a sole proprietor (doing business under an FBN) or is self-employed (doing business under their own name) or a gig worker (think Uber or Lyft). This is a flat amount, fully funded by the federal government, and will be available through July 31, 2020.
You must apply for state unemployment for disaster relief (DUA). The form is the same form used for employees so it is confusing when you first start because it asks questions that apply only to employees. You will either skip or answer if you can with an explanation in the space provided. You do need to indicate that you are otherwise able or available to work. As you get towards the end of the application it asks if you are self-employed and if you have lost work because of a disaster. This is where you will provide your DUA information.
To apply for DUA in California go to:
You may find their Fact Sheet useful as well.
DUA consists of weekly payments that are computed in the same way as regular unemployment insurance (UI) payments. For self-employed that will be figured on your net income in accordance with your Profit and Loss Statement for 2019.
The base period for all DUA claimants is the most recently completed tax year prior to their last date worked. For most claimants this is the prior calendar year. The exception to this is that unemployed self-employed individuals may base a claim on net self-employment earnings.
The minimum weekly amount will be 50 percent of the average unemployment compensation amount in California during the quarter immediately preceding the date of the disaster.
- Low end about $164/week
- High end about $450/week
- Waiting period is waived
CA Micro-Lending Program:
On April 4th, Governor Newsom announced that California is putting $50 million toward micro-loans for businesses that might not be eligible for SBA loans for the Paycheck Protection Program. The new “micro-lending” program will be operated through the IBank. Application for program opened Friday, April 3, and will be available through the state’s coronavirus portal: