Luckily the Federal government has stepped in to help. The CARES Act that was passed in March and it is specifically designed to help small businesses and independent contractors like agents and photographers. The specific program is called the Paycheck Protection Program that has allocated $349 billion to help retain jobs. In short, it is a way to get a very low interest loan from the SBA and if you pay your employees, or yourself as an independent contractor or self employed person, it can be converted into a grant (a forgivable loan) for the amount paid for up to 8 weeks of payments. It is effectively unemployment assistance for small businesses and independent contractors, of which most agents and photographers are classified.
You can find details on the program here: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
For independent contractors and self employed individuals, you can start to apply for the loan on April 10th. Small businesses and sole proprietorships started the application process on April 3rd. It is likely you will want to do this through your bank, as most FDIC insured banks are able to handle these loans. The maximum loan you can get is 2.5 times your average monthly payroll for 2019, subject to a cap of 100,000 for any one individual. Other expenses like interest on a mortgage and utility bills can also be covered (although this part is unclear for a small business owner – is it my mortgage or the company’s mortgage).
Example of how to calculate the loan amount. Lets say your annual commission income from your business was $120,000 in 2019. The monthly average would be $8,3333.33 (because you are over the $100,000 cap, the max monthly average is $100,000/12), and your maximum loan amount would therefore be $20,833 (2.5*$8,333.33). If you paid an assistant or someone as an employee where you issued a W-2, you can include that in your loan amount too. Otherwise, if you paid someone as an independent contractor, they would have to go through the same loan process on their own. Your 1099-Misc or other documentation will be required as part of the loan process.
You can effectively use this money to pay yourself during this downturn and the government will forgive the loan if you apply for the forgiveness from your bank. So yes, there are some hoops to jump through but this is a great way to help you through a difficult time. You are going to want to do it as soon as you can and likely through your existing bank as many are limiting applicants to existing customers only. And, the banks are still figuring it out – I applied for our company on April 3rd and it was really just a form I filled out for Chase Bank. They will get back to me…let’s see how long this takes. I will post with an update later.
Benefits of this Paycheck Protection Program:
- Forgivable loan grant – you will have to apply to get it forgiven from your bank
- Interest is 1%
- Payments deferred for 6 months
- Anything not forgiven is paid back over a 2 year term
- No personal guarantee or collateral required (this is big)
It is a process to go through, but this is effectively a way independent contractors and self employed individuals, along with small businesses that have employees (including yourself) can get unemployment insurance, something that really has not existed before. I am grateful for the relief the government is trying to provide and let’s all hope this is enough to get us through this difficult time in our country.