Our Legislative Advisor Bruce Lehman Esq.,of Lehman Nilon & Associates summarizes the available relief to Small Businesses, the Self-Employed and
Non-for-Profits under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The emergency economic relief legislation signed into law last week contains several provisions that can provide support for artists who either are self employed or work in small businesses. Illustrators and fine artists can avail themselves of
three separate programs under the new law:
- Pandemic Emergency Unemployment Compensation;
- Emergency Injury Disaster (EIDL) Loans, and
- The Paycheck Protection Program.
In addition, Quarterly Estimated Tax Payments can be deferred until the end of the calendar year without penalty.
Pandemic Emergency Unemployment Compensation
Normally, self-employed individuals are not covered under state-operated unemployment compensation programs as the premium for unemployment compensation insurance is paid by an employer. However, the emergency legislation covers self-employed persons
who lose their income. The new legislation expands eligibility to include anyone who is:
"self-employed, is seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment under State or Federal law...."
Under this provision of the CARES Act, a self-employed person will receive the weekly payment that their state normally provides under unemployment compensation insurance plus $600. The benefit lasts for up to 39 weeks. The applicant for unemployment
compensation may self-certify that he or she is otherwise able to work and available to work except for their unemployment or because they have been diagnosed with the Covid-19 virus, are unable to reach their place of employment because of the Covid-19 virus or are caring for someone with the virus.
To participate in this program a freelancer or self-employed artist needs to apply through their state's unemployment office. In most cases this can be done online. The following URL from the U.S. Department of Labor contains information and has a menu
option that will link you to your state office.
https://www.careeronestop.org/LocalHelp/UnemploymentBenefits/
Economic Injury Disaster Loans (EIDL)
EIDL loans are normally used in the case of natural disasters such as a hurricane. Small businesses with fewer than 500 employees may borrow up to $2 million under the program. However, the CARES Act extends the EIDL program to self-employed
individuals and non-profits with fewer than 500 employees who have suffered economic loss as a result of the Coronavirus pandemic.
The program is administered by the Small Business Administration (SBA). Anyone falling into these categories may apply for loan "advance" of up to $10,000 for the purpose of maintaining payroll, meeting increased costs to obtain materials, or making
mortgage or rent payments. There is little paperwork and the applicant can self-certify that he or she meets the criteria. The SBA is supposed to provide the loan advance within three days of application.
While these advances are called loans, repayment is waived if the applicant uses the money for the enumerated purposes. Information about applying for an EIDL advance, including a link to an online application, may be found on the SBA website
at https://www.sba.gov/disaster-assistance/coronavirus-covid-19.
If an applicant also applies for a loan under the Paycheck Protection Program, separately provided in the CARES Act, the $10,000 advance will be deducted from any loan under that program.
The Paycheck Protection Program
The CARES Act provides $ 349 billion in forgivable loans for small businesses and non-profits of fewer than 500 employees as well as self-employed individuals. The loans can be used for salaries and other payroll expenses, rent and utilities,
mortgage interest and interest on other debts incurred before February 15, 2020.
Applicants can seek amounts that are two and a half times monthly payroll expenses for full-time employees. The limit is $10 million with repayment within ten years at a 4% interest rate. However, the loan in effect converts to a grant if the
recipient keeps all employees on the payroll through June 30, 2020 and uses the money for allowable expenses. Allowable expenses are: (1) payroll costs; (2) continuation of employee health care benefits; (3) employee salaries, commissions and similar compensation, (4) mortgage interest; (5) rent; (6) utilities; (7) interest on pre-existing debt.
The loan program will be administered by banks and credit unions that that have agreed to participate. As of this writing the program is not up and running, but cooperating banks and credit unions should be able to begin processing applications in the
very near future. Since the loans will be processed on a first come, first serve basis until the $349 billion limit is reached, it is important to move quickly if there is a desire to participate in this program. If you have a bank with which you normally do business, you may wish to contact them as soon as possible to get in the que for this program.
