Business Updates - CARES Act and Unemployment Benefits
It is reported that the funds allocated by the US government for both the Economic Injury Disaster Loan COVID-19 cash advances and the Paycheck Protection Program loans have been fully used (we explained EIDLs and PPPs in some detail in a previous post). It is not clear if all of the funds have actually been disbursed, or if the “used” amount includes those loans that have been approved (we know some of you have been approved but have not received funding yet). In any case, businesses should continue the process of applying for funding, as Congress is currently working on additional funding for both programs, as well as other economic support measures.
We welcome your questions and will do our best to help you understand the options available, especially regarding whether EIDL, PPP, unemployment benefits, or some other option is the best choice for you at this time. However, it is worth noting that lenders and financial institutions have significant discretion in their lending practices and the documentation required for PPP loan applications varies significantly depending on the lending institution. If you come to the conclusion that PPP is the right choice for your business, the next step is to get in touch with the bank from which you plan to get the loan ASAP, so that they can tell you the information they need from you. We are willing to help you locate and assemble this information if you need assistance.
A few questions have been raised on numerous occasions, so we’ll address those here:
Is it possible to apply for the EIDL grant in addition to the PPP loan?
Yes. However, the PPP loan amount for which an organization is approved may be reduced by the amount of the cash advanced under an EIDL COVID-19 loan (since that does not have to be repaid).
Can businesses claim the payroll tax credits for qualified sick leave or qualified family leave (under sections 7002 and 7004 of the Families First Coronavirus Response Act) for compensation paid using proceeds either from EIDL or PPP?
No. The amount of a PPP loan eligible for forgiveness excludes equivalent amounts on which the said credits are calculated.
Are amounts paid to independent contractors included in the calculation for monthly average payroll costs?
No. Independent contractors will be able to determine if they are eligible to apply for relief for themselves under the various options available.
PPP Loans for Self-Employed Individuals
One significant development is that the Small Business Administration, which is responsible for administration of the PPP and EIDL programs, has provided guidance for issuance of PPP loans to partnerships and self-employed individuals. We will not go through the calculations here, but it is worth noting that sole proprietorships without employees must have shown a profit for 2019 to be eligible for funding. We are still waiting for additional guidance for sole proprietors (with or without employees) who began operation between January 1, 2020 and February 15, 2020. Sole proprietorships with employees have more complicated calculations. The government has also stated that partners in partnerships should not apply under the rules for self-employed individuals, but that the partnership should apply for a single PPP loan. If you are a sole proprietor looking to go this direction, begin by contacting your bank to get a list of the information they require and we will be glad to assist you in compiling this.
Unemployment Benefits for Self-Employed Individuals
Ordinarily, self-employed individuals are not eligible for unemployment benefits. The reason is that they are not paid via true payroll, and accordingly do not pay into the unemployment fund. However Disaster Unemployment Assistance (DUA) is a federal program that provides temporary assistance to individuals in a federally designated disaster area, if their employment has been lost or interrupted as a direct result of the disaster. North Carolina is still developing an online application for these benefits, which the Division of Employment Security estimates will be operational by April 25, 2020. We will send out an additional notification when this portal is live.