COVID-19 Cash-Flow Update

The nationwide economic shutdown that went into effect in mid-March has done the vast majority of U.S. businesses no favors. In fact, the shutdown has been devastating for business owners and Freelance consultants alike.

According to an April 18, 2020 survey of 16, 620 business owners conducted by Alignable, an online referral and business development organization for business owners and self-employed individuals that claims 4 million members, 43% of businesses in America have had to temporarily close. Of those that remain open, 28% report that business is down by 75%; 15% said that business is down by 50%; 11% found that business is down by 25%; and a lucky 2% report that the shutdown has been good for business (maybe grocery and liquor stores?). The enormous impact of COVID-19 on the economy has compelled the federal and state governments to offer financial assistance to U.S. citizens.

The Payroll Protection Program, which is designed to help businesses that employ fewer than 500 workers to retain those workers on the company payroll in the face of often drastic revenue reductions brought on by the coronavirus business shutdown, ran through the original $349 billion appropriation approved by Congress in less than two weeks. Happily, Congress has just pushed through another bill that will not only add $320+ billion to PPP but also earmark $60 billion of the funding for small banks, credit unions and community based lenders.

Furthermore, business owners and Freelance consultants can apply for a loan that’s up to 2.5 times the average monthly payroll of the business, not to exceed $10 million per entity.

Remember, the PPP loan can flip to a grant if the recipient Freelancer or business owner applies 75% of funds received to payroll expenses (I including the owner’s draw) and 25% of the funds to business operating expenses. Otherwise the loan, which must be repaid within 2 years, is payable at 1% interest.

The Small Business Administration has also played its customary role in assisting business organizations large and small through the Economic Injury Disaster Loan program. EIDL provides loans and also a maximum $10,000 immediate cash advance to businesses financially harmed by the shutdown. The SBA reported that as of April 20, nearly $3.3 billion in EIDL grants and $5.5 billion in EIDL loans had been awarded. Congress is expected to approve an additional $60 billion in EIDL funding, bundled with the $320+ billion initiative to replenish PPP.

Still more help will be made available to Freelancers by way of the new Pandemic Unemployment Assistance program , a variation of Unemployment Benefits and therefore administered by the states, is set to provide up to 39 weeks (maximum) of unemployment benefits to those who have historically been excluded , i.e., us—- independent contractors, the self-employed Professionals, or gig workers.

To be eligible, applicants must provide self-certification to demonstrate that they are available to work but are prevented from doing so as a result of COVID-19 or actions related to it, including one’s own illness due to the virus or a close family member who contracts the virus. Even workers who are collecting sick pay or other benefits that amount to less than one’s weekly pay, or those who are working fewer hours, resulting in diminished income, might nevertheless be eligible to collect PUA benefits. For more information, search Pandemic Unemployment Assistance in your state.

Thanks for reading,

Kim

Photograph: Kim Clark 4/23/2020. The Doc Martens store on Newbury Street in the Back Bay.

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