Economic Loss Qualification for Targeted EIDL Advance Grants for Independent Contractors

Do you qualify to get an additional targeted advance as an independent contractor under the targeted EIDL grants?

The Consolidated Apprppriations Act of 2020 (signed December 27) included some economic stimulus measures for pandemic relief, and part of that act opened up the EIDL loan and grant program once again.

There's a new twist: The targeted EIDL advance may allow businesses and self employed individuals to receive as much as $10,000 as an advance that does not have to be repaid.

Under the original EIDL, grants were limited to $1,000 per employee. For the independent contractor, that meant only $1,000.

Those who received the $1,000 grant (or more) may be eligible to receive additional funds. There are some additional qualifications for the targeted program:

• Your business must be in a low income community
• You have to have had an economic loss.

You can read more about whether you qualify as being in a low income community here. In this article, we address “economic loss” qualification.

This post will cover:

• What the economic loss requirement is for the targeted EIDL advances.
• How an independent contractor can find out if they qualify
• At the end of the article you can access a tool to help you identify if you had a period in which you had an economic loss that qualifies you for the targeted EIDL advance.

How does the government define economic loss for the Targeted EIDL advances?

The language of the act says it this way: To be covered you need to have “suffered an economic loss of greater than 30 percent.”

They go on to define it a little better:

the amount by which the gross receipts of the covered entity declined during an 8-week period between March 2, 2020, and December 31, 2021, relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019

Consolidated Appropriations Act of 2020 Title III Section 331 (a)(4)(A)

Here's my translation: You qualify if your earnings during any eight week in that period were 30% (or more) less than the same eight week period in 2019. This can be for any eight consecutive week period between March 2020 and the end of the year.

Say for example, say you made $10,000 in a particular eight week period in 2019. $7,000 is 30% lower than $10,000. In other words, if you earned $7,000 or less in the same eight week period, you would meet the economic loss test for the targeted EIDL advance.

Only one eight-week period of 30% or greater economic loss is needed to qualify for the targeted EIDL advance, according to my understanding.

Understanding “gross receipts.”

The definition in the act says that qualification is based on gross receipts. For those of us who are independent contractors or self employed, this is another twist when compared to the original EIDL.

Under the emergency EIDL program, sole proprietors used their Schedule C as documentation. The focus was more on profit.

This time they're looking at something entirely different. It's not about the profit, but the amount of money that came in before expenses. As the SBA definted it, “gross receipts includes all revenue in whatever form received or accrued.”

For those of us who are gig economy contractors, that means the money we received for our work for Doordash, Uber Eats, Lyft, Instacart, Grubhub and others. It includes delivery or trip fees, tips, referral fees, bonuses. Anything you received in exchange for your gigs.

If your business involves selling things, it means sales minus your cost of goods sold, returns and allowances. I often give the example of a time when I used to flip used bikes. I'd buy a bike for $100, spend $25 on parts to fix it up and then sell it for more. The sale minus the $125 is what my gross receipts would be.

This is different than the Paycheck Protection Program's economic loss test for second draw funding

Same act. Different definition. That's government work for you.

I'm not sure why they did this. The same act re-opened the Paycheck Protection Program. If you met an economic loss criteria, you could receive a second PPP loan.

With an entirely different definition for economic loss.

Under the Paycheck Protection Program, economic loss is defined as a 25% loss of income in one quarter relative to the previous year.

A quarter instead of eight weeks. 25% instead of 30%. Who comes up with this stuff?

I have no idea why the differences exist. Is it because 30% is a larger amount and so it's easier to meet it in a shorter period? I don't know.

How can you determine if you qualify?

You may have noticed that this website is geared towards gig economy contractors, people who work with apps like Grubhub, Doordash, Uber eats, Lyft, Instacart, etc.

As a lot, we tend to be really bad at bookkeeping. If you want to qualify for something like this, you may want to improve that. Let's face it: If you want to get business funding, you should treat your business like…. a business.

If you're self employed in some other area, or you own or manage a more typical business, that applies to you as well.

You need to have some form of record that shows your weekly earnings.

I highly encourage you to get a bookkeeping program that lets you create reports.

It's possible to keep a spreadsheet of your earnings. You could be old school and have a handwritten ledger. I would really recommend you step up your game and get a bookkeeping program of some kind.

There are some free ones that will do the basics for you.

There are two reasons:

One, a good bookkeeping program will let you plug in a date range and create a report for you. It will do the math for you.

Two, you have documentation. As I write this, I don't know the details yet of what exactly the SBA is going to look for. However, they will want documentation of that economic loss.

In their recent guidance on the PPP the SBA stated “such documentation may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, quarterly financial statements or bank statements.”

I know that's about the PPP and it mentions quarterly instead of 8 week periods. However, this is the same organization.

The bottom line is, those of us who are independent contractors won't have tax documents that indicate weekly revenue. That means they'll want to have business records. I would expect at some point they'll ask for something like a profit and loss statement.

Not sure what a P&L is or how to create one? This is why you really want to think about a good bookkeeping program. Get something that will allow you to create a P&L that covers a specific time frame.

Some bookkeeping resources to help you prepare.

I wrote awhile back about getting started with bookkeeping as an independent contractor. That will help you get an idea what you need to keep track of.

You can also check out the tax guide on this site to get other ideas of what kinds of things you need to record for your business.

There are three programs that you can check out. I'll be up front, I'm an affiliate for these three. Purchases may lead to me receiving some compensation, which helps me keep this site operating.

I chose these three because they're structured specifically for self employed individuals. They create reports that line up with Schedule C reporting that we need as independent contractors.

Hurdlr

Hurdlr is the best free bookkeeping and mileage tracking option that I've found for independent contractors. In fact I think they are more flexible and easier to use than Quickbooks Self Employed. The free version of Hurdlr allows you to create profit and loss reports. The paid version gives you additional reporting and automatic tracking (linking your bank account) and automatic mileage tracking.

Quickbooks

Quickbooks is an established name and is often preferred by accountants. I find that Quickbooks Self Employed is great for how it's set up for Schedule C reporting and it's easy to get started. I find it's not nearly as flexible but it does the basics.

You can read my review of Quickbooks Self Employed and how well it works for independent contractors in the gig economy

You can get a more full powered version of Quickbooks with their online product, though you may need to do some customization to fit Schedule C reporting. The reporting on the Quickbooks online product is more powerful, including allowing you do run comparison reports.

GoDaddy Bookkeeping

You may have never heard of GoDaddy Bookkeeping. I used them in the past when I was flipping bikes because it was great for linking up with my eBay and Paypal accounts.

I found that GoDaddy bookkeeping was a bit more economical than Quickbooks Self Employed. It was easy to get started with and easy to use. You can read my review of how GoDaddy Bookkeeping works for gig economy contractors.

Targeted EIDL Advance Economic Loss Tool

You can use this tool to get an idea of if you had a sufficient economic loss to qualify you for the targeted EIDL advance or grant.

You can plug in your weekly income for 2019 and 2020 and identify certain time frames that might meet the 8 week 30% economic loss test. However, you will want to run your own reports and do your own math to verify if the math is correct.

Here are some things I want to make clear about this tool:

1. This is not an official tool. Nothing is guaranteed about it. It's only a tool to help you get an idea if you MAY qualify.

2. Language in the act indicates it's for income starting March 2, 2020. This tool starts with the week of March 1 through March 7. I am assuming a week is defined by Sunday through Saturday. That's how I see it defined in most bookkeeping programs. I have not seen a definition from the SBA that clarifies the treatment of 8-week periods.

I would assume that for example, April 5 through May 30, for example, would be measured against the calendar weeks of April 7 through June 1. That just makes sense to me that we're talking about Sunday through Saturday weeks compared to Sunday through Saturday weeks. I could be wrong.

3. I'm not a programmer. I used a resource to create this tool that probably wasn't meant for this kind of thing. I've tested it but can't guarantee all the math and formulas are 100% correct. Please comment if you find any errors.

4. There's nothing official about me. I am not a tax or financial professional. Neither am I related in any way to the SBA or the US government. I'm only a blogger writing about the gig economy. I put this tool together based on my understanding of the program and make no guarantees to its accuracy.

5. Results of this tool do not guarantee approval or denial. One, other factors can impact eligibility. Two, it relies on your accuracy in putting information in. Three, glitches in the form or misunderstandings in my interpretation (such as that whole 8 week definition I mentioned in #2.

Use of this tool signifies that you understand and accept these disclaimers.

Using the Targeted EIDL Advance Economic Loss Tool:

It's pretty simple.

Plug in your weekly gross revenue for each week listed, both for 2019 and 2020.

Verify that you've entered all your information by checking the box at the end of the form.

You will see the percent of loss for each eight week period. This is how much lower, by percent, your earnings were in 2020 compared to 2019.

• If your economic loss, based on the numbers you put in, was more than 30% for any given eight week period, the form should display in green that it meets the 8 week test.
• If you made more money in 2020 than you did the same period, the economic loss will show up as a negative percent.
• In the event that you earned money in an 8 week period in 2020 but had no earnings for the same period in 2019, the percentage may say “Infinity.” In that situation you would not qualify for that period as you made more in 2020 than in 2019.
• My understanding is that you only need one eight-week period to meet the 30% test for you to qualify.