Relief VIA PPP and OED
SBA Loans and Grants for the Self Employed & Small Businesses
We have posted the recording of our Q&A webinar with Colin Sears from Business Oregon to talk about the SBA programs (PPP and EIDL) as they apply to music businesses (including the self-employed). Here are some KEY takeaways:
All Sole Proprietors and self employed people should apply for the Payroll Protection Program (PPP) ASAP (as soon as banks reopen applications) See list of participating Oregon banks. By early next week all banks should have reopened their applications. First come, first served.
Many music people applied for the EIDL first because it promised a fast “3-day $10K grant”. I have yet to hear from anyone who has received anything yet as much as a month since applying. The grant is now reduced to $1,000 per employee and the loan is $15,000 max and repayable in 24 months. Do not waste your time on the EIDL - The PPP has already paid out more than $4 Billion to Oregon companies and will get more money within the coming week. Apply for the PPP Now.
Despite its name, the Paycheck Protection Program is designed to support self employed people (including musicians, independent contractors, and sole proprietors). The money must be used in specific ways to be fully forgivable (making it a grant for those that comply). 75% of the funds provided must be used for “payroll”. As a self-employed person that "payroll" is your personal NET annual profit from your business, after business expenses. The remaining 25% can be used ONLY for mortgage, rent or utilities. (This restriction was incorrectly stated in the webinar.)
To calculate your PPP loan amount as a self-employed person, take your NET profit up to $100K then divide by 12 and multiply by 2.5. For example, if your NET income as a sole proprietor was $63,000 it would be $5250/month multiplied by 2.5 for a loan of $13,125.
DOCUMENT EVERYTHING - as you go through the process with the banks to apply, keep records of every phone call, and email. Once you receive your PPP Loan keep perfect records on what you spent the money on. It has not been confirmed yet, how the program will validate your compliance to forgive your loan, so be super compliant and document everything at every stage of the process.
PPP and Unemployment Benefits? - As we heard from Bruce Fife of the AFM on our 4/16 webinar for Musicians and the Self-Employed, the Oregon Employment Department is still confirming (privately) that self-employed folks SHOULD NOT APPLY FOR UNEMPLOYMENT YET. We'll go into much more detail on the relationship between PPP and PUA in a section below.
Can I apply for both the PPP and the PUA?
You absolutely can apply for both, but not at the same time (that could get you denied for one or both). Start with the PPP and then once that runs out, lay yourself off (close down your business) and apply for the PUA. If your PPP runs out before July 1, you may be eligible for one month's payment from the PUC ($600/week additional pay on top of PUA that ends July 25th)
As we did for the unemployment scenarios in a previous email, the easiest way to demonstrate a possible scenario is with a case study of an imaginary music professional. My caveats of what we do not know are glaringly highlighted, so take this as a way to see the relationship between the PPP and unemployment, not as definitive numbers or formulas.
Case Study "GLORIA"
Gloria is a successful, independent music publicist who earns $63000 NET per year (after business expenses). Or an average of ____ per month. Her PPP Loan amount (based on the formula described above) would be $13,125 to be spent in two months.
MAJOR CAVEAT: The Oregon Employment Department has not yet confirmed the formula they will use for the self employed. if Gloria’s $63,000 earning was W-2, she would get the $648/week OED maximum. Who knows what will be the formula or amount in the end but this graph tries to show the way that unemployment and PPP might work together rather than giving a definitive amount for unemployment benefits. I have used a COMPLETELY MADE UP AMOUNT that is the average of the the maximum ($678/week) and suggested flat benefit which would be $404/week or $1616/month (yellow line).
The Red line reflects what Gloria might expect if she received the PPP first and subsequently applied for unemployment (PUA) benefits. For May and June she would match her full pre-covid salary from the PPP. In July she will close her business (laid herself off) and applied in the new OED system to receive the PUA (calculated with our fake formula). If her date of unemployment is near to July 1, her benefits will be paid retroactively (even if the system is slow to approve her. She’ll get $3416 in July ($1616 PUA plus $2400 PUC). The PUC program ends July 25, so all months after that will just be the PUA benefits. The PUC added in July only is only available to her because she applied for her PPP in April and was approved quickly.
The Yellow line shows what might happen if Gloria waits and only applied for unemployment benefits on the assumption that applications for 1099 workers open in Late June. This uses the FAKE $404/week assumption described above. Since UI benefits (PUA and PUC) are paid retroactively back to when Gloria shut down her businesses when the venues closed in mid-March. So, if the OED opens the applications in June, Gloria would be eligible for a big retroactive check of 4 months of PUA @ our estimated rate of $1616 per month plus four times the $2400 per month PUC payments.
SUMMARY: For those OREGON self employed folks that have not yet applied for the PPP, I hope we have convinced you to apply ASAP. The PPP will pay you 100% of your salary for two months (as opposed to the 70% or far less you can get from the PUA) If you apply for the PPP now you may see funds by mid or end of May. By the time you lay yourself off August 1, you can apply for PUA unemployment benefits but not the PUC. At this point your primary decision in Oregon as a self employed (1099) worker is whether you can sustain yourself until July (or possibly August) before getting any money. If your savings will not sustain you, you likely need to apply for the PPP and give up on the PUC.
For our music kin in Vancouver, the choice is really yours since your PUA system is already accepting applications (as of April 19). You too can apply for the PPP now and use it for two months and then tap the PUA system (confident it will be ready to apply whenever you need it) or you might opt to only apply for PUA from the Washington Employment Department and get the full PUC benefits of an additional $2400/month through July 25th. Oh to have choices! Be sure to thank your Employment Department workers!
Since the PPP is provided as a two month sustaining loan given in a lump sum, recipients must use the full amount within two months of receiving it (or being approved for it, we’re not sure). So, let’s assume that Gloria applied in March and was delivered a total of $13,125 of which she had to use $9843 (75%) to pay herself for two months. The graph only reflects the application of the loan to pay Gloria spread across two months (red line).
Because Gloria was early to apply, she can close her business (lay herself off at the end of June) and file for unemployment starting July 1. This will entitle her to the last four weeks of the PUC of $600/week that ends July 25 (green line). Anyone who waits until May to apply probably will miss out on any PUC money.
SUMMARY
For those OREGON self employed folks that have not yet applied for the PPP, I hope we have convinced you to apply ASAP. The PPP will pay you 100% of your salary for two months (as opposed to the 70% or far less you can get from the PUA). Each of you needs to make your own bet, but given the uncertainty of when the OED system will take and approve applications and how much you will get, I would not necessarily hold out for PUA only just to get the PUC. PPP is at least, "the devil you know".
For our music kin in Vancouver, WA, the choice is really yours since your PUA system is already accepting applications (as of April 19). You too can apply for the PPP now and use it for two months and then tap the PUA system (confident it will be ready to apply whenever you need it) or you might opt to go immediately for PUA from the WED and get the full PUC benefits of an additional $2400/month through July 25th. Oh to have choices! Be sure to thank your Employment Department workers!