Creatives, Independent Contractors, and the Self-Employed

The Coronavirus public health crisis has severely impacted many sectors of the economy, especially for self-employed individuals, artists and other creatives, and independent contractors. In an effort to ease the financial burden of the crisis, Congress passed a $2 trillion stimulus package to provide economic relief to individuals and businesses in need. We’re here to answer several commonly asked questions about the new resources – click any of the questions below to reach their answers quickly.

  • What kind of financial help is available? Who’s qualified?
  •  How much money can I get?
  • Can I get loans and grants?
  • What are the conditions?
  • Do I have to repay the money?
  • Is there any money left?
  • How do I get it?
  • What’s best for me?

The federal government offers small businesses, sole proprietors, independent contractors, and creatives three main avenues of financial assistance: loans, grants, and unemployment.

  • Loans: The Small Business Administration offers two kinds of loans, a forgivable one for up to $10 million through its Paycheck Protection Program (PPP) and an unforgivable one for up to $2 million through its Economic Injury Disaster Loan (EIDL) program.
  • Grants: One-time emergency grants of up to $10,000 are available through the EIDL program.
  • Unemployment: The CARES Act provides unemployment benefits for individuals who typically are ineligible for state administered unemployment benefits, including sole proprietors and independent contractors.

PPP Loan
You must satisfy all of the following 3 criteria to be eligible for a PPP Loan.

✓ Was your business harmed by COVID-19 between February 15, 2020 and June 30, 2020?
✓ Have you been in business since February 15, 2020?
✓ Are you one of the following types of businesses?

  •  Business with ≤500 employees
  • 501(c)(3) non-profit with ≤500 employees (or meet other SBA size requirements)
  • Self-employed worker, independent contractor, gig worker, or sole proprietor
  • Tribal business
  • 501(c)(9) veterans’ organization
  • Independently-owned franchise

EIDL Loan or Grant
You must satisfy all of the following 3 criteria to be eligible for an EIDL grant or loan.

✓ Are you one of the following types of businesses?

  • Small business or business with ≤500 employees
  • Non-profit
  • Sole proprietor
  • Independent contractor
  • Cooperative or ESOP with ≤500 employees

✓ Have you been in business since January 31, 2020?
✓ Can you demonstrate an ability to repay the loan?

  • You’ll need to provide information about your gross revenue and cost of goods sold for the previous twelve months. You do not, however, need to personally guarantee any loan <$200,000.

You must first apply for regular state-level unemployment insurance and be denied before applying for

Pandemic Unemployment Assistance. Eligibility and guidelines vary by state, so creatives and self- employed individuals are encouraged to contact their state’s unemployment insurance office as soon as possible to learn about how to collect benefits. Generally speaking, covered individuals need to file a claim in the state where they work. If you have worked in multiples states, the state unemployment insurance office where you now live can provide information about how to file claims with other states. States usually require the following in order to maintain weekly eligibility for unemployment benefits:

  •  File weekly or biweekly claims
  • Be able to work, be available to work, and actively seek work each week you claim benefits
  • Report any earnings from work you had during the relevant week(s)
  • Report any job offers you accept or decline during those week(s)
  • Meet any other state eligibility requirements 

PPP Loan
The maximum loan is $10 million, but the Small Business Administration will tailor the size of your loan according two factors: how long you’ve been in business, and the dollar size of your payroll.

✓ Were you in business February 15 – June 30, 2020?

  • Yes → maximum loan is 2.5x your average monthly payroll for that period
  • No → maximum loan is 2.5x your average monthly payroll between January 1-February 29,2020.

✓ What counts as payroll?

Doest Count 

  • Compensation (salary, wage, commission, cash tip, or similar), including income paid to self-employed people, independent contractors, and sole proprietors who aren’t on traditional W-2s.
  • Paid vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Contributions to group
    healthcare benefits, including
    insurance premiums
  •  Retirement benefits
  • State or local tax on employee

Does Not Count 

  • Compensation >$100,000
  •  Compensation of employees whose principal place of residence is outside the US
  •  Taxes imposed/withheld under IRS Code Chapters 21, 22, and 24
  • Sick and family leave for which a credit is allowed under the Families First Coronavirus Response Act sections 7001 and 7003

EIDL Loan or Grant
The Small Business Administration has not publicly released guidelines regarding how it determines what size of a loan or grant to approve for each business, but your creditworthiness is relevant. The maximum loan you can receive is $2 million, and the maximum grant is $10,000.

Regular unemployment benefits are usually about half your average weekly wage. The Pandemic Unemployment Assistance available through the CARES Act now offers that plus an additional $600 for
four months.

Yes, but you cannot use both an EIDL loan and a PPP loan for the same purpose (e.g. to cover the payroll of the same employees for the same months), but you can use the loans together to cover different employees over the same period or the same employees over different periods. There are ways to refinance your EIDL loan into a PPP, but note that any EIDL advance must be subtracted from the amount of the PPP loan that is forgivable.

PPP Loan

There are 3 conditions to receiving a PPP loan.

✓ The loan can only be used for:

  • Payroll costs
  • Costs of group healthcare benefits during paid sick, medical, or family leave, and insurance premiums
  • Employee salaries, commissions, or similar compensation
  • Utilities
  •  Rent
  • Interest payments on a mortgage, but not payment toward the principal
  • Interest on any other debt obligations that were incurred before the covered period

✓ You must promise to use at least 75% of the loan to keep workers employed, and at close to fullcompensation and benefits. For the loan to be entirely forgivable, you cannot cut wages by >25%.

✓ By June 30, 2020, you must rehire employees back up to the level your workforce was at on February 15, 2020.

The loan typically accrues interest at rates between 2-5%.

PPP Loan:

  • No, if you either:

    Don’t lay off workers, or

    Rehire all your workers by June 30, 2020.
  •  Yes, you must repay a portion if you:
     Lay off workers without rehiring them,

      Cut an employee’s wages by more than 25% during the loan period, or

    Use the loan for unapproved costs.

    Note: Any unforgivable portion must be repaid within 2 years with interest beginning at 1%, though repayment may be deferred for 6 months.

EIDL Loan: Yes
EIDL Grant: No
Unemployment: No

The EIDL program is no longer accepting new applications for its loans and grants, but the PPP application remains open. While the initial funding pool of $350 billion evaporated in just two weeks, Congress recently authorized another $310 billion that became available Monday, April 27. There is still money left, but you need to act fast. Even if you don’t need the assistance right now, there is a solid chance it will be gone by the time you need it.

The EIDL program is no longer accepting new applications for its loans and grants, but the PPP and unemployment programs remain open. Organizations can apply for PPP by calling their banks and other lenders directly. Some lenders don’t require you to have a customer relationship with them in order to process your PPP application, including:

If you have already applied for an EIDL or PPP loan, do not wait for your bank or the SBA to get back to you; they are swamped and have lost applications before. Follow up with your bank directly, and with the SBA either at their general hotline (800-659-2955) or their loan processing line (817-868-2300).

While there are no right or wrong answers, creatives, self-employed individuals and independent contractors should take some factors into consideration when deciding which forms of aid to apply for.

Factors include whether you have:

  • employees
  • rent and utility costs
  • a business mortgage.

As a general matter, self-employed individuals who do not pay any rent for their business activities and who do not hire any employees will be better off by directly filing for unemployment. On the other hand, if the creative hires some employees and has a monthly rent to pay, the PPP or the EIDL programs might be more attractive as they will cover those additional expenses related to rent, utilities and employees’ wages.