The Consolidated Appropriations Act of 2020 extended the COVID-19 Economic Injury Disaster Loans and introduced a targeted advance for previous borrowers who met certain conditions.
How does all of this impact independent contractors who were in business prior to the pandemic? If you contract with gig companies like Doordash, Uber Eats, Postmates, Lyft, Grubhub, Instacart and others, can you take advantage of this program?
Let's walk through some of the frequent questions about the Covid-19 EIDL loans and advances. I'll list the questions first and then have the questions and answers below.
General Questions about the Economic Injury Disaster Loan program and how it relates to independent contractors in the gig economy
- Am I eligible for the COVID-19 EIDL advance and loan as an independent contractor with companies like Doordash, Uber Eats, Instacart, Lyft, Grubhub etc.?
- What is the COVID-19 EIDL program?
- Does the COVID-19 EIDL advance money have to be repaid?
- Can the COVID-19 Economic Injury Disaster Loan be forgiven?
- How much assistance can I receive as a self employed contractor?
- How can I use the funds from the EIDL?
- What things can I NOT use funds for from the EIDL loans?
Differences in the new Targeted EIDL Advance
- What were the original qualificatins for the COVID-19 EIDL Loans?
- I started gig work after being laid off during the pandemic, do I qualify?
- What is different about the targeted EIDL advance?
- In What Way are qualifications for the targeted EIDL advance different than the original COVID-19 EIDL program?
- How do I know if I'm in a low income community?
- How can I tell if I had a 30% Economic Loss in 2020?
Applying for the COVID-19 EIDL Advance and Loan
- Where do I apply for the EIDL?
- Why does the SBA application site say the EIDL advance is no longer available?
- If I received the EIDL advance grant last year and I qualify for the targeted advance, how do I apply?
- Why is the SBA delayed in administering the new targeted EIDL grants?#17
- Can I apply for a second loan if I took an EIDL loan out in 2020?
Filling out the EIDL Loan Application
- If I never applied for the COVID-19 EIDL before, can I apply under the original qualifications?
- What should I put for Business Legal Name as an independent contractor for gig companies like Doordash, Uber, Instacart, Grubhub, Lyft or others?
- I don't see “Independent Contractor” as an organizaitonal type on the EIDL application – what should I choose?
- What do they mean by gross revenue on the EIDL application?
- What is my “cost of goods sold?”
- Do previous forgivable EIDL advances received or forgiven Paycheck Protection Program loans get counted in “gross receipts”?
- How many employees should I put down on the EIDL application? Do I count myself if I'm an independent contractor?
- What is the right “Business Activity” and “Detailed Business Activity” for the application if I'm a gig worker with Doordash, Uber Eats, Instacart, Lyft or any of the others?
- What documentation do I need for my EIDL application?
Receiving the loan or grant
- Why would I be denied for the advance or loan?
- When the SBA contacts me for the targeted loan, how will they have me document that I meet the qualification?
- How soon would I receive funds if I qualify?
- Do I have to pay taxes on the COVID-19 EIDL advance grant or the newer targeted EIDL advance?
- When do I begin making payments if I take out aCOVID-19 EIDL Loan?
- Will I be penalized if I pay off the EIDL Loan early?
- Can I also receive a Paycheck Protection Program forgivable loan if I receive the COVID-19 EIDL advance or loan?
- Where can I receive more information on the COVID-19 EIDL program?
Answers to the Frequently Asked Questions about the COVID-19 EIDL loans and advance grants.
Am I eligible for the COVID-19 EIDL advance and loan as an independent contractor with companies like Doordash, Uber Eats, Instacart, Lyft, Grubhub etc.?
Yes. The EIDL is a business loan program administered by the Small Business Administration. When Doordash, Uber, Instacart, Lyft, Grubhub and friends signed you up as independent contractors, they signed you up as a business. You have to pay taxes like a business and you meet the definition of being a sole proprietor.
What is the COVID-19 EIDL program?
The Economic Injury Disaster Loan program was created to help businesses get on their feet after a natural disaster. The COVID-19 EIDL program is a special form of this program created by the CARES Act of 2020.
There are two components of the COVID-19 version of the EIDL program. One was an immediate advance from $1,000 to $10,000 (depending on the number of employees) that is a forgivable grant. The other is a long term loan program where businesses can borrow funds at a 3.75% interest over 30 years.
Funding ran out for the immediate advance or grant portion of the program in mid 2020. It is not clear if the original grant program will reopen. New legislation has opened up an additional targeted grant portion that will be addressed in questions further down on this page.
Does the COVID-19 EIDL advance money have to be repaid?
No. The advance is a forgivable grant that does not need to be repaid.
Can the COVID-19 Economic Injury Disaster Loan be forgiven?
No. The loan portion of the EIDL is an actual loan and must be repaid.
How much assistance can I receive as a self employed contractor?
The original EIDL forgivable advance grant will paid up to $10,000. The SBA determined that the advance would be based on $1,000 per employee. Self employed contractors were able to receive a $1,000 grant. It is unclear whether this portion of the program will be re-opened.
The loan amount is based on your business income for the year prior to the pandemic. The SBA never released the formula that I know of. I've read estimates that it's based on four to six months worth of gross revenue. While the original EIDL had a maximum loan amount of $2,000,000, I'm seeing reports that the SBA is capping it at $150,000 for the 2021 version.
How can I use the funds from the EIDL loans?
The purpose of the loan is to provide working capital to help a business get by through economic loss during the pandemic. Some examples of things the money can be spent on are regular business expenses like rent and utilities, accounts payable, regular monthly expenses and for any payroll not covered by a PPP loan.
What things can I NOT use funds for from the EIDL loans?
You cannot use the funds for things not related to day to day operations. It is not meant to be for payments to the owner, payment for long term loans, adding to your facilities or equipment, repair of physical damages or relocation of your business. You can see a more extensive list on page 5 of this PDF from the SBA.
Differences between the original COVID-19 EIDL advance and loan and the new Targeted EIDL Advance.
What were the original qualificatins for the COVID-19 EIDL Loans?
The EIDL was made available to small businesses with 500 or fewer employees who were negatively impacted by the Pandemic. Businesses had to be operating prior to February 15, 2020. Independent contractors and gig economy workers qualify as businesses, as they file their taxes as sole proprietors. Certain types of businesses are excluded, with more detail found at the SBA. Question 4 of the SBA COVID-19 EIDL FAQ sheet goes into more detail.
I started gig work after being laid off during the pandemic, do I qualify?
You would not be eligible for the EIDL program if your business was started after February 15. The COVID-19 Economic Injury Disaster Loan program was created to help existing businesses that were hurt by the pandemic or by the shutdown of businesses related to the pandemic.
What is different about the targeted EIDL advance?
The targeted EIDL advance will allow businesses that qualify to receive a full $10,000 advance grant regardless of the size of their business or the number of employees. Under the original program the SBA determined that the grant amount would be based on $1,000 per employee up to the $10,000 amount. Under the targeted advances, businesses who received the smaller grants and who meet certain criteria could be eligible for up to the full $10,000 grant.
How are qualifications for the targeted EIDL advance different than the original COVID-19 EIDL program?
To qualify for the targeted EIDL advance, the number of allowable employees has been reduced to 300 or fewer. A business needs to be located in a low income area and have had an eight week period in 2020 that had an economic loss of 30% or greater than in 2019.
How do I know if I'm in a low income community?
You are in a low income community if your community meets at least one of these criteria:
- The poverty rate for the area is at least 20%
- The median family income of a community outside a metropolitan area is 80% or lower of the median family income for the state
- The median family income of a community inside a metropolitan area is 80% or lower of the median family income for the metropolitan area.
Section 332 of the Consolidated Appropriations Act stated that Section 45D(e) of the Internal Revenue Code of 1986 would be used to identify a low income community. That's the basis of the three criteria listed above.
Your “community” is based on the census tract your business is located in. If you are self employed as an independent contractor, your business address would normally be your home address. You can read more about low income communities here.
How can I tell if I had a 30% Economic Loss in 2020?
Economic loss is defined in the act as “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 preceeding March 2, 2020 or during 2019.”
For example, if your gross earnings (money received from the gig companies for independent contractors) were $10,000 over an eight week period in 2019, but they were $6,000 for the same eight weeks in 2020, that comes out to a 40% economic loss, which meets the 30% test. If those 2020 earnings were more than $7,000, those earnings would not meet the test. You can read more about meeting the 30% economic loss test and access our tool that allows you to plug in your weekly revenues and identify any 8 week period that would qualify.
Applying for the COVID-19 EIDL Advance and Loan
Where do I apply for the EIDL?
You can apply ONLY at the SBA's application site https://covid19relief.sba.gov/#/. Note that as of January 19, visits to the site were met with a popup warning that stated this is only for the loan application. Advance grants are currently not available and the process and the targeted advance has a different process. DO NOT APPLY ANYWHERE BUT THE SBA. There are many scams out there that will try to steal your personal information or charge money to apply through fake sites. Only apply through the SBA.gov website.
Why does the SBA application site say the EIDL advance is no longer available?
The original advance grants ran out mid 2020. At this point it's unclear whether it's just that the SBA hasn't updated this part of the site, or if they will not open up the advance at all to anyone who had not previously applied for the COVID-19 EIDL program. They are prioritizing the targeted advances for those who received smaller grants and qualify for the targeted amount, then to those who applied prior to December 27 and did not get an advance due to funds running out. It is not clear whether they will open up new applications (if funds remain) to new applications after that point.
If I received an EIDL grant previously and qualify for the targeted advance, how do I apply?
You don’t. The SBA seems to be taking a ‘don't call us, we'll call you' stance. They do not want you filling out a duplicate application. If you received a grant previously, they will contact you with steps to take to document your eligibility. Be patient. On January 19, 2021 the SBA announced that the EIDL targeted grants won't start being administered until at least February.
Why is the SBA delayed in administering the new targeted EIDL grants?
On January 19, 2021 the SBA announced that administration of the new targeted EIDL grants will be delayed until February. There appear to be a couple of reasons for this. For one, the new Presidential administration can mean changes in staffing at the SBA and time is needed to get the team updated. For another, the new qualifications add a layer of complexity to verifying eligibility for applicants that takes time to get into place.
Can I apply for a second loan if I took an EIDL loan out in 2020?
No. There are no provisions for taking a second loan. The only additional funding in the updated COVID-19 EIDL program for those who applied in the past is the additional grants through the targeted EIDL advances.
Filling out the EIDL Loan Application
Some things to keep in mind when filling out the application for the EIDL Loan:
- At this point in time, the SBA is only taking applications for the loan portion of the COVID-19 EIDL. There is no promise of any advance or grant for new applications.
- Remember that this is a business loan administered by the US Government. You want to have accurate bookkeeping. Do not guess. Do not make up numbers.
- The following questions are being answered specifically for independent contractors in the gig economy who contract with apps such as Doordash, Instacart, Uber, Lyft, Grubhub, Postmates and similar apps. We went into more detail on the step by step application process in the original EIDL program here.
If I never applied for the COVID-19 EIDL before, can I apply under the original qualifications?
At this point in time you may only apply for the loan portion of the EIDL. There are some business types who were made eligible this time around who were not eligible the first time who will be able to apply. It is not clear to me if first time applicants will have an option to file for the advance grants once all the other priorities have been gone through (providing funds are still available).
What should I put for Business Legal Name as an independent contractor for gig companies like Doordash, Uber, Instacart, Grubhub, Lyft or others?
You will list YOUR legal name unless you have incorporated your business. Do NOT put Doordash, Uber, Grubhub, Instacart or any other gig company name down as your business name. You are not an employee and you are not applying on their behalf. Use your legal name.
I don't see “Independent Contractor” as an organizational type on the EIDL application – what should I choose?
You are a sole proprietor. The only exception would be if you actually incorporated or formed an LLC for your gig work. In that instance, you choose the type of business that you registered as.
What do they mean by gross revenue on the EIDL application?
Gross revenue is the money your business received. As an independent contractor in the gig economy, that’s the fares, fees, bonuses and tips you received for your gig work. Pay careful attention to the dates: It’s asking for gross revenues for the 12 monthss prior to the disaster: That’s February 1, 2019 to January 31, 2020. You’ll want to add up your earnings for those dates.
The SBA did release further clarification on their terminology for the Paycheck Protection Program which also has some qualification based on gross revenue. While it is for a different program I would expect them to use the same definitions. Question 1 on this FAQ goes into detail about what they mean by Gross Receipts.
What is my “cost of goods sold?”
For most of us in the gig economy, that’s going to be $0. This is not asking for expenses. Cost of Goods Sold is related to the cost of particular items that you have purchased and re-sold. If part of your business involves reselling items, the cost you pay for those items is what goes here. You can see the SBA FAQ's on the PPP that I mention in the previous question
Do previous forgivable EIDL advances received or forgiven Paycheck Protection Program loans get counted in “gross receipts”?
No. The SBA FAQ's on the PPP loan, question 2, specifically answers that question stating that “The amount of any forgiven First Draw PPP Loan or any EIDL advance, which are not subject to federal income tax, is not included in the calculation of ‘gross receipts.' Again, though this is documentation for the PPP and not the EIDL, I would expect the SBA to remain consistent on this for the EIDL.
How many employees should I put down on the EIDL application? Do I count myself?
You will only count yourself as an employee if your business is structured in such a way that you run payroll. That would be rare as an independent contractor for gig economy apps. If you do have employees on payroll, you would count them, if not you would put 0 down for number of employees.
What is the right “Business Activity” and “Detailed Business Activity” for the application if I'm a gig worker with Doordash, Uber Eats, Instacart, Lyft or any of the others?
The best fit that I find for delivery and rideshare contractors is going to be Transportation. When I applied I had put “none of the below” for “Detailed Business Activity” though many are using “Transportation and Limousines”
What documentation do I need for my EIDL application?
You will be asked to submit evidence that you were in business prior to the pandemic. I submitted my Schedule C for 2019 taxes. The SBA has also mentioned that payment records or bank records may also be requested to show when you were in business, and may also request business financials such as a profit and loss statement.
Receiving the loan or grant
Why would I be denied for the advance or loan?
There are many reasons one would be denied. It’s not because of being an independent contractor. You can read more in depth about the reasons, but here are some in a nutshell:
- Not treating this like a business loan: being sloppy with the information in your application
- Not providing the documentation requested.
- Entering erroneous information
- Not passing a credit check
- Sloppy accounting.
- You weren’t in business prior to February 15, 2020
- You didn’t really make any money prior to the pandemic (as previous income determines what you can borrow)
- Not living in a low income community or documenting a drop in income (targeted program)
When the SBA contacts me for the targeted loan, how will they have me document that I meet the qualification?
The SBA has yet to release details on the documentation they will require related to the additional criteria. I would expect them to use this tool or something similar to identify whether you meet the criteria.
In the SBA's recent FAQ about the PPP Question 4 identifies how they will ask borrowers to document their reduction in gross receipts. They list documentation as being Quarterly financial statements (such as a profit and loss) and/or quarterly or monthly bank deposits highlighting applicable deposits.
I would assume they will use similar documentation for the EIDL targeted advance qualifications. One difference is that for the PPP they ask for quarterly financials and bank records. Because the EIDL qualification is based on an 8 week period instead of a full quarter, I would expect they will want weekly financials (such as a profit and loss statement) and bank statements.
How soon would I receive funds if I qualify?
You will find a delay because the SBA will not be processing EIDL targeted advances until at least February 2021. However, once they get started, they've been fairly quick on the turnaround, typically making deposits within a few days of receiving the application and documentation.
Do I have to pay taxes on the COVID-19 EIDL advance grant or the newer targeted EIDL advance?
The forgivable grants or advances are NOT taxable income. While it was looking like the IRS was going to tax those grants, language in the Consolidated Appropriations Act explicitly stated that this would not be taxable income.
When do I begin making payments if I take out aCOVID-19 EIDL Loan?
Payments are deferred one year, so would begin a year after the loan is disbursed. The payment term is 30 years at 3.75% interest.
Will I be penalized if I pay off the EIDL Loan early?
No. You can pay off the loan at any time without penalty
Can I also receive a Paycheck Protection Program forgivable loan if I receive the COVID-19 EIDL advance or loan?
You may receive the PPP loan as well as the EIDL advance and/or loan. The main stipulation is that the PPP and the EIDL cannot be used for the same expenses. In the original CARES Act, if you received the emergency advance and the Paycheck Protection Program forgivable loans, the amount of the grant would reduce the amount of the PPP that could be forgiven. The latest act has changed that although details of how to handle that have not been worked out yet.
Where can I find more information on the EIDL?
These resources on the EntreCourier go into more detail on different aspects of the COVID 19 Economic Injury Disaster Loan (EIDL) advance grants and the loans.
- How to tell if you're in a low income community for EIDL Qualification
- Economic Loss Qualification for Targeted EIDL Advance Grants for Independent Contractors
- Do Delivery Contractors Qualify for the new EIDL Grants (Doordash, Uber Eats, Instacart, Grubhub etc.)?
- Step by Step applying for EIDL COVID-19 Grant/Loan as an Independent Contractor
- Why did I get denied for EIDL or PPP as an independent contractor?
- EIDL vs PUA vs PPP: Understanding COVID-19 Pandemic Relief Options for Independent Contractors in the Gig Economy
I also found a number of external articles that were helpful in gathering information.
- Small Business Administration Details on the Targeted EIDL Advance
- SBA Frequently Answered Questions on the Economic Injury Disaster Loan Program (original program under the CARES act).
- SBA Frequently Asked Questions on Second Draw PPP forgivable loans, released January 19, 2021, which provides a glilmpse into the documentation and definitions they will likely use for the targeted EIDL advance.
Remember that information is constantly changing and this is based on my research. I will try to keep this updated as information changes.