COVID-19 has interrupted income for thousands of businesses across Louisiana. Necessary shutdowns and social distancing have shaken the bedrock of our economy, and non-traditional businesses are experiencing their effects, too. In the wake of the COVID-19 pandemic, the bipartisan CARES Act allocated funding to assist small businesses through this economic hardship.
“Nonprofits, sole proprietors and independent contractors shape our economy here in Baton Rouge,” said Baton Rouge’s Mayor-President Sharon Weston Broome in a webinar Thursday afternoon. The webinar, co-hosted by NexusLA and the Louisiana Small Business Development Center, demonstrated how non-traditional businesses can apply for financial assistance during COVID-19.
Nonprofits, independent contractors and sole proprietors can take advantage of expanded small business loans under the CARES Act. Here’s how.
Navigating Financial Assistance as a Nonprofit
Nonprofits applying to receive an Economic Injury Disaster Loan (EIDL) through the Small Business Administration (SBA) are eligible for up to a $2 million loan, repaid over up to 30 years, at a fixed interest rate of 2.75%. The EIDL application process has been streamlined, so you won’t be asked to verify your nonprofit status. Simply select nonprofit from the list of business types and when asked for your percent of ownership, put 0%.
Some nonprofits also qualify for the Paycheck Protection Program (PPP), which is designed to maintain employment during COVID-19. Currently, only organizations filing as 501(c)(3) and 501(c)(19) are eligible to apply, but guidance from the Department of the Treasury is being updated frequently to reflect any changes. The Nonprofit Finance Fund and the Jitasa Group are both offering tools and resources to help you determine your cash flow needs and support your application process.
Applying for Aid as a Sole Proprietor or Independent Contractor
When applying for an EIDL loan, sole proprietors and independent contractors should list their own names where the application asks for the business’s name and their Social Security number in place of an employer identification number. If you are an individual operating as a limited liability company (or LLC), then select “disregarded entity” on the application.
Consider consulting your banker when determining your classification. A sole proprietor who is not incorporated, not an LLC and has no partner may instead be classified as an eligible self-employed individual. Independent contractors are those who file 1099 forms. Gig workers, like drivers for ride-share companies, are probably classified as independent contractors, but for specific classification queries it’s always best to consult your banker.
To determine what loan amount you qualify for, draw up your profit and loss statement form 2019. This should include both your expenses and your gross revenue. Consult your CPA for further assistance.
The CARES Act has expanded unemployment insurance to include independent contractors. Consequently, independent contractors qualify for either SBA loan assistance or unemployment insurance. Consult your CPA to determine which option is best for your specific needs, and stay tuned as the Louisiana Workforce Commission updates their unemployment guidance.
