For the small-business owners who quickly applied for the CARES Act assistance offered through the Small Business Administration in cooperation with banks, help has begun arriving in some cases. I’ve talked to owners who’ve received varying degrees of payments.
The application and acceptance processes have not been easy. The banks and agencies doing the processing were overwhelmed with applications. Different programs were quickly rolled out to the public, and funding was exhausted within days. When round two was introduced, banks and small businesses were still playing catchup.
The easiest route to aid seemed at first to be the Economic Injury Disaster Loans’ quick infusion of $1,000 per employee up to $10,000 to make payroll. It did not require applying through a bank; rather you could go direct to SBA. If received, this amount could later be rolled into the Paycheck Protection Program, applied for separately through a bank.
More than one owner-operator asked me why they received only $1,000, not $10,000. I tried to counsel them through any misunderstanding and emotions that often ran high. I learned that even though many owner-operators opt to establish their business structure as a limited liability corporation, they have little to no payroll records for paying themselves. Instead, their records show seemingly random income transfers as needed for personal use. Many continued to co-mingle income and expenses in one checking account.
These owners could apply for the PPP loan, but like as not they didn’t have a very high taxable income, thus reducing benefits from the aid. (Like most owners, they did everything possible to lower their taxable income.)
Owner-operator Bill Ater’s situation was something of an opposite. When the programs were announced in early April he could already see the freight writing on the wall. He didn’t hesitate to apply through SBA for the EIDL advance and then through more than one financial institution for the PPP, and plenty early on.
His business is set up as an S Corp, with a system to pay himself and his wife, also part owner, weekly. These records were beneficial, we believe, not only in streamlining the application but establishing without a doubt the payroll amount. Because his wife is also an employee of the business, they received not $1,000 but $2,000 in an EIDL advance.
