COVID-19 Loans for Self-Employed

COVID-19 Loans for Self-Employed:

Congress passed the CARES Act to mitigate the negative economic impact of the coronavirus pandemic COVID-19. The most popular element for individuals is the payment of $1,200 per adult plus $500 per child for economic consequences. If you are below the income limit, the benefit will be paid. If the IRS has your direct deposit information, they will send the money there. If not, they will soon create a website where you can provide instant deposit information.

The CARES Act also provided funds to help small businesses and the self-employed. Many negotiations were completed. Even if it doesn’t, many small businesses have experienced a massive drop in revenue and profits. Many freelancers lost their jobs. My 100% online business is also going through a serious crisis. My blog’s ad revenue dropped 50% in March compared to March last year. Nearly half of my clients canceled their applications to hire a financial advisor. I hope April is even worse. If the economic outlook is uncertain, that makes it clear to everyone.

The CARES Act introduced two loan programs for small businesses and the self-employed:

the Temporary Economic Loan (EIDL) and the Pay Protection Program (EMP). Since both programs are very new, the rules and guidelines are still being created and published. Many attorneys and CPAs read the law and information obtained from government agencies. They try to explain how these programs should work: who is eligible, what is important and what is not, how much can you borrow and how much can you lose? I love this scene from retired CPA Peter Reilly:

Economic Disaster Loan (EIDL)

The Federal Small Business Administration (SBA) directly administers the Economic Disaster Lending Program (EIDL). The share of EIDL is 3.75%. Part of the loan can be forgiven.

The SBA determines the amount of the advance and when it will be sent to you. If you receive an advance loan, the advance does not have to be repaid. The advance on the loan can be $10,000 or less. Nothing happens until you enter. So apply now and worry about the rest later.

Payroll Protection Program (EMP)

The main focus of the wage protection program is wage coverage. For the self-employed, the fee includes payment for the services offered. The PPS loan is a two-year loan with an interest rate of 1%. Up to 100% of the PPP loan can be repaid.

The government administers this program through participating banks and credit unions. It will probably be easier if you stop at the institution where you already have a business account. Anyway, I don’t have a trading account because I use the Fidelity Investments trading account and Fidelity is not a bank. Many independent contractors only use a separate personal check account, not one that is officially designated as a checking account. Therefore, it may be difficult for you to find a bank that accepts your application.

For example, Bank of America initially required that you have a commercial audit account and commercial loan report by February 15, 2020. Opening accounts just doesn’t work. After people protested, they started signing up for a company account from February 15. This means that if you have a Chase credit card, Bank of America will not accept it; they want you to go to Chase. Meanwhile, Chase requires that you have an active Chase Business checking account as of February 15, 2020. If you have your own Bank of America checking account and business credit card with Chase, none of the banks will accept you.

Each SBA district office has a resource guide for their district.

The core of each resource guide is a list of local SBA lenders in the district. Start by connecting to lender websites and find out which bank or lender is processing your Paycheck Protection Program application. Start with credit unions and banks you’ve never heard of. They direct you to existing customers instead of multiple megabanks.

Using my neighborhood guide, I found a local credit union that has an online PPP loan application. I have completed and signed the online application. I have attached the SE program to our 2019 income tax return as proof of our payroll. If this credit union accepts my application, I would like to open accounts there.

If you’re willing to venture outside of your area, try Sunrise Banks in Minneapolis. According to its website, Sunrise Banks accepts applications from all lenders regardless of who is a banker.

Once you have found a bank to process your application, you must follow the bank’s procedures and provide all necessary information and documents.

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