Update: On Thursday, April 16, the Small Business Administration stopped accepting PPP loan applications because the $349 billion appropriation was exhausted. Congress is currently negotiating over an extra $250 billion for the PPP program.
PROVINCETOWN — Sole proprietors, independent contractors, and the self-employed were supposed to be helped by the $2 trillion stimulus package that became law last month. A parallel unemployment system was created to include them, and they were also included in two different small business loan programs.
As of mid-April, however, none of these is offering immediate help to the self-employed. Unemployment benefits won’t be coming until sometime in May, and when the loans might arrive is even less clear.
UI for Everyone
About half the state’s workforce is covered by traditional unemployment insurance (UI), according to Phineas Baxandall, senior analyst at the Mass. Budget and Policy Center. For the half that isn’t, Congress created a temporary Pandemic Unemployment Assistance program.
The program has a minimum benefit of $267 a week and includes 1099 and other kinds of self-employment income in the calculation of benefits. And for the next four months, it is supposed to cover an additional $600 per week beyond traditional unemployment compensation. For many self-employed people whose work has halted, this is the most significant source of relief and support they are likely to get.
But while regular UI is distributing money, the new system is not. Last week, the governor’s office announced that the existing unemployment website would not be able to process claims for the self-employed. He said a new platform would begin accepting applications on April 30.
The good news is that the pandemic unemployment program allows retroactive benefits, all the way back to Feb. 2, 2020. Independent contractors will be able to file for all of February, March, and April at once when the new system comes online. But it is likely they’ll have to wait until mid-May, or even later, for the state to process and deliver those benefits.
EIDL Loans End With a Whimper
The only relief that many one-person enterprises have actually applied for already is the Small Business Administration’s disaster loan program. More properly called the Economic Injury Disaster Loan, or EIDL, the application was rolled out in the terrifying third week of March, when a wave of state shutdowns was grinding the economy to a halt. A $10,000 advance was supposed to go to small businesses and independent contractors within days of applying.
That was almost four weeks ago, and for many applicants the only sign of the advances has been a belated email from the SBA, confirming that the $10,000 will actually be $1,000 per employee, up to a per-company total of $10,000. That means just $1,000 for an independent contractor or self-employed person — hardly enough to save a business.
The loan part of the EIDL has also been shrinking. According to U.S. Sen. Ben Cardin (D-Md.), 3.8 million businesses have applied for EIDL loans. The average amount requested was $200,000, but the program is so underfunded that the loans are now being capped at $15,000. Unless something changes, EIDL may not have much to offer for the self-employed person.
Loans to Pay Yourself?
The other SBA loan open to independent contractors is the Payroll Protection Program. Larger businesses are specifically excluded from counting their 1099 workers as part of their PPP loan applications, said Seamen’s Bank President Lori Meads, because 1099 workers and independent contractors are allowed to apply for their own PPP loans.
The SBA didn’t allow one-person outfits to apply until Friday, April 10, however, a week after other businesses could apply. More than half of the $349 billion allocated to PPP loans had been spoken for as of Sunday, April 12, according to the American Bankers Association. And on Thursday the 16th, the SBA announced that all $349 billion had been allocated.
The PPP application is fairly simple, and independent contractors can still apply. The loan is equal to 2½ months of last year’s payroll — for a one-person business that means just your pay. If the loan is used to pay yourself in May and June 2020, it will be forgiven by the SBA. But acceptance of new loan applications now depends on additional funding from Congress.
It might take some time with a calculator, or a math-loving friend, to figure out whether a PPP loan is more helpful than the Pandemic Unemployment Assistance program would be. It’s not likely to be a whole lot faster, though. There may be money on the horizon in May, but for independent contractors and others who can’t earn money in April, that’s something of a distant comfort.