You have lost work during the COVID-19 crisis, but you are not an employee, do not get a W-2, and do not pay into your state’s unemployment insurance system. Now what?
Fortunately, the federal Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) passed on March 27, 2020, provides for financial relief for the self-employed and small business owners in several ways. Private lenders are also offering various forms of assistance to those who have lost work due to the pandemic. Find out what sort of help is available to you to help you weather this world-wide health emergency.
Unemployment Insurance Eligibility for Independent Contractors
The CARES Act expands unemployment eligibility to gig workers, the self-employed, and independent contractors. Under the CARES Act, Federal Pandemic Unemployment Compensation (FPUC) provides $600 per week for 13 weeks to eligible workers. Pandemic Unemployment Emergency Compensation (PUEC) extends the maximum amount of weeks a worker can receive unemployment benefits by 13 weeks.
As of this writing (April 13, 2020), the state unemployment agencies are working to implement expanded coverage. Most states have yet to set eligibility criteria and what types of proof of eligibility will be required. Check with your state’s unemployment agency for the latest developments, and be sure to apply for unemployment benefits if the agency urges you to despite the uncertainty.
SBA Loan and Grant Programs for the Self-Employed
Emergency Economic Injury Disaster Loans (EEIDL)
The CARES Act established a direct loan product called EEIDL that is available to eligible businesses in designated disaster areas, which due to the pandemic includes all 50 states. Sole proprietorships, self-employed individuals, independent contractors, and businesses having 500 employees or less are eligible for EEIDL funds.
The application has been streamlined due to the COVID-19 emergency and can be found and completed on the Small Business Administration (SBA) website.
EEIDL $10K Grants
Approved self-employed applicants can receive a grant of up to $10,000, even if his or her application for an EEIDL is ultimately denied.
PPP Small Business Loans
The CARES Act created the Paycheck Protection Program (PPP), which is also administered by the SBA. A PPP loan can be wholly forgiven if at least 75% is used for payroll and payroll costs. You may use the remainder of the PPP loan to pay the business’ mortgage interest or rent, and utilities.
PPP modified existing loan programs to relax the usually-strict criteria for eligibility. Your business is eligible for a PPP loan if it has 500 or fewer employees, and is a:
- 501(c)(3) tax-exempt nonprofit organization;
- 501(c)(19) tax-exempt veterans’ organization;
- Tribal business under section 31(b)(2)(C) of the Small Business Act.
If you or your business is eligible for a PPP loan, apply ASAP because PPP is only available until June 30, 2020, and there are limited funds available.
The SBA Will Pay 6 Months of Other Loans
The SBA will pay the principal due as well as interest for all other section 7(a) business loan for six months. You can borrow up to $1 Million under this program until September 26, 2020. Consult the SBA website for a list of SBA-licensed lenders.
Assistance with Other Bills During the COVID-19 Health Emergency
Student Loan Forbearance
The CARES Act provides a six-month interest-free forbearance on all federal student loan payments and stops wage garnishments for student loan default. This does not include private loans, Perkins Loans, or FFEL loans. Contact your lender or servicer to find out if they are offering loan deferral or forbearance to those who have lost work due to the pandemic.
Mortgage Payment Assistance
Federal mortgage lenders Freddie Mac and Fannie Mae are now offering monthly mortgage payment forbearance for up to 12 months. Some private lenders are granting forbearance for up to 120 days. Contact your lender to find out if you are eligible for deferred mortgage payments.
Defer a Car Payment
Auto lenders are offering help with monthly payments to those who have lost work due to COVID-19 and social distancing. Ally Bank and Hyundai Finance are offering deferred monthly loan payments for up to three months. Call your lender to find out if they are offering something similar.
Relief from Credit Card Payments
Capital One, Chase, Citi, U.S. Bank, Wells Fargo, and other credit card lenders are offering help for their customers who have lost work due to the Coronavirus health emergency, including:
- Skip a Payment or Two
- Lower Interest Rate
- Ceasing Collection Efforts on Defaulted Debt
Visit your credit card company’s website or give them a call them to find out what sort of help is available to you.
Look into what assistance is available to you under the CARES Act and from private lenders. You’ll be surprised at the amount and type of help that is available to you during this health crisis.
About the Author
Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy lawyer.