You may be wondering, as an independent contractor with gig economy delivery apps like Grubhub, Doordash, Postmates, Uber Eats, Instacart, Shipt, and so on, why was I denied pandemic relief such as the EIDL or PPP? Isn't the independent contractor supposed to be eligible for these programs?
Yes, you do qualify. Many independent contractors and sole proprietors are getting funds through these programs.
But many are being denied.
I've been involved in a referral program for the PPP loans, and in discussions with the company involved have heard that independent contractors are being approved at a much smaller rate than others. I'm seeing in forums large numbers who applied for EIDL and were turned down for the loan or who never received the grant.
Why are so few qualifying? Is it because they really don't want to help the sole proprietor or independent contractor?
Here are a number of observations that I see as to why people are being denied.
Not treating this like a business application.
Let me put it another way
People are sloppy.
These are business programs.
This is not a “share this on Facebook and Bill Gates will give you a million dollars” type of thing. Yet when I go into the Facebook pages, that's how it's being treated.
This is not ‘fill out a simple form and get free money' kind of thing.
Both the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP) are administered by the Small Business Administration (SBA). These are business programs and these are business loans.
Too many people are not taking that part of things seriously when applying.
I wish I had a $1,000 grant for every time that I read someone saying “I guessed at the numbers.”
You don't guess on a business loan.
If you are applying for a business program, you are claiming you are running a business. Part of running a business responsibly is that you keep good records.
The Paycheck Protection Program application asks a lot of questions about your numbers. There are very specific numbers and these numbers come from your tax documentation. You cannot just make up numbers here. The information you put in can and likely will be compared to your tax forms.
The EIDL application gets into less detail. For most of us, the only question that will have an answer is the gross revenue part. But there's a catch that not a lot of people are asking for. They are NOT asking for 2019 tax information. They aren't even asking for numbers for all of 2019.
The EIDL application asks for your gross revenue for the 12 months prior to January 31, 2020. Note, it's not asking for 2019 numbers, but the 12 actual months leading up to that. You have to know what you made between February 1, 2019 and January 31, 20210. If you are treating this like a business and actually keeping records, you could pull this up.
Not paying attention to the terminology.
These are not random forms that ask questions but the questions have different meanings depending on who's being asked.
These are actual business terms.
You need to understand what a sole proprietor is compared to a general partnership, because entering the right thing can make all the difference.
Do you understand what “Gross Revenues for the Twelve(12) Months Prior to the Date of the Disaster (January 31, 2020)” means? Do you know the difference between “Gross Revenues” and “Net Revenue” and “Net Profit?” Running a business doesn't mean you have to know those things, but it does mean you have to be able to get those answers. Again, it's not a guessing game here, there's a very specific number.
Hint: The answer to that question about gross revenues: It's the money you received between February 1, 2019 and January 31, 2020. It's not the money received minus your expenses. This is not asking for your 2019 Schedule C information.
What about cost of goods sold? I've heard a lot of people say you put your expense information in there. I've even seen an article on a prominent business site suggest that. Your expenses are not cost of goods sold. Cost of Goods Sold is a very specifically defined accounting term.
Don't guess at what these terms mean. If you're entering information here that doesn't belong there, that can flag you and get you denied. Or if you're entering the wrong numbers, that can limit what you are eligible (or get you in trouble for taking more than you are eligible.
A warning about submitting these applications
When you submit these applications, you are giving the SBA permission to check into information. They can check your credit, they can check your tax records, they can check your banking information.
If what you are putting on the application doesn't line up with what all that information suggests, that can be enough for them to say nope, not happening.
Not completing the applications or providing documentation
I had someone explain this to me about 1099 filers: “Across the board 1099 loan requests have seen a lower conversion rate than the average applicant. There are a variety of factors that contribute there but lots of the drop off comes from the individual's inability to provide tax documents or other proof to support their requests for funds.” He also had stated that there was a high number of people who would start the application process but never complete it.
Not checking off the box!!!
Here's a big one. Maybe this falls under the not understanding terminology: On the EIDL application, there's a spot to check off next to “I would like to be considered for an advance of up to $10,000.”
I heard of a lot of people who did NOT check this because they thought it meant they were asking for a larger loan.
What they did was essentially tell the SBA that they didn't want the $1,000 grant.
Granted, the SBA could have made that question more clear. In fact I'm not totally sure why they even put that in there, because why WOULDN'T anyone want to be considered?
But I think hands down the is the greatest reasons people didn't get the grant. If they had paid attention and had read about how the program works, they'd have realized that the grant portion of this program comes in the advance. But people rushed through the application, unchecked this because they didn't look into what that actually means, and they didn't get the grant.
Not having the documentation.
With the PPP you have to have your Schedule C. There are too many contractors out there who don't even know what a Schedule C is. Either they haven't filed taxes on their earnings or they weren't paying attention.
Too many contractors are unable to pull up a financial statement of any kind. They wouldn't even know what to look for. Or they haven't kept any records.
Remember, these are business loans. You MUST have business records. If you're not comfortable keeping the records, that's fine, a lot of business owners aren't. But if that's the case, you need to find someone who CAN help you do so, because that's just part of running your business.
Not actually completing the application.
There are a number of people who don't completely follow through on the application.
I'm not sure why. Maybe they realized that they were over their heads a bit. Were they intimidated by the process?
I'm going to jump on a somewhat unrelated soapbox for a moment here.
This whole process points to an abuse of the independent contractor designation by gig companies. The problem here is, Uber and Grubhub and Lyft and Doordash say they are hiring people as businesses, but they are clearly doing it without the people signing up understanding that they are signing up as businesses.
A lot of that is the fault of the contractor. How can you sign up for something like that and not pay attention to what you're signing up for??? Having said that, I also believe that these companies KNOW that most people don't realize that's what they're signing up for, and I belive they don't WANT people to know.
But the thing is, when I see how so many contractors treat this application process, it's clear they aren't paying attention to the fact (or taking seriously that fact) that they are running a business.
End: Soapbox rant.
Sorry, but that's been bubbling up while I was writing this. In the end, everything I've been writing so far boils down to the fact that people aren't taking their business status seriously. That's by far THE biggest reason they're not getting the aid that they may sincerely need.
But I think that's part of what's happening here is, people are filling this out and suddenly realizing, I have no clue what I'm doing here. And sometimes, it just doesn't get completed.
And then there's always the issue of not being sure you submitted. I can relate to this one: I've had to get into a habit of regularly checking my drafts folder. Too many times I've drafted an email and just failed to actually send it.
Unfortunately with the EIDL loan, there's no confirmation sent out that the application was received. I'm guessing that the only reason any such confirmations are sent out on PPP applications is simply that actual banks (not the SBA) are taking the applications and they tend to be a bit more competent about that kind of thing.
Aside from not treating this like a business, the main reason that independent contractors with gig companies like Grubhub, Uber Eats, Doordash, Postmates etc. don't get the PPP or the EIDL pandemic relief is they simply don't qualify. There are a few things that can go into play here.
The applicant wasn't in business enough to qualify
This is a big one with the Paycheck Protection Program. The qualification for what you can get is based on 2 and a half months worth of your 2019 earnings. Because of the way documentation works for sole proprietors and independent contractors, if you started after December 31 you simply wouldn't qualify.
Remember that these programs are designed to help existing businesses that have had their ability to earn impacted by the pandemic. Businesses that just started or that started after the pandemic don't really have a way to say what things were like before the pandemic.
The applicant can't pay it back.
This is especially an issue with the EIDL. Credit scores and credit history are a bigger factor than they are with the PPP. That's because, aside from the advance, you're expected to pay back the balance. If you don't have the credit history to qualify for a normal loan, you probably won't qualify for this one either.
They don't believe you are a business.
Some of this goes back to people not taking it seriously as a business application and some of the other factors I mentioned.
This is not an individual stimulus program. It is not meant to be free money for your pockets. In both cases they are loans meant to help you keep your business going.
Remember the warning I posted above: You have given the SBA permission to check into your taxes and finances. Is there anything that indicates you ARE in business? If you've never filed your business income on your taxes, you may have a hard time getting them to believe you're really in business. If they don't have record of you registering as a business, or of any 1099's sent to you or anything else that indicates that you truly are operating a business, you have the possibility of not being approved.
They don't believe you were impacted by the Pandemic.
Remember, this isn't a free money thing. It's not another version of the $1,200 stimulus check. This is cash to help keep your business afloat during this pandemic.
Here's the challenge for a lot of couriers: It's really really hard to make a case that your business was hurt by the pandemic if you're making more money than ever before. For a lot of folks delivering for Uber Eats or Grubhub or Doordash or others, payments have been higher than they've ever been. If you've been able to keep delivering, if you didn't feel the need to stop for safety considerations, etc., and if you weren't impacted by factors like your market being over-saturated with other couriers, it's really hard to say that your business was economically injured.
Here are a couple of things that can factor into this kind of decision:
You didn't really make any money before this happened.
The PPP asks for your Schedule C for 2019. They're looking for the bottom line: What were your profits? If you drove so many miles that you don't owe any money on taxes, that's great for your taxes but it's going to kill you when it comes to what you can qualify for. The PPP is based on 2.5 months worth of your PROFITS (what's left over after miles and expenses) for all of 2019.
They divide the profits by 12 to get the average monthly amount. Then they take two and a half months of that average monthly amount and that's what you qualify for. If you only worked the last couple of months, they still divide that total by 12 to get the monthly average. If you had a lot more expenses than income, you won't qualify for much.
On the EIDL, they only ask for income information for businesses (and if you understand accounting, you know that cost of goods sold is actually figured into income). I think the reason they do it differently is that they are looking for whether your ability to earn was hurt by the pandemic rather than how much you profited. But again, if you didn't make much money (OR if you weren't paying attention and you entered your expenses into the cost of goods sold) that told them you didn't really make that much money.
And if you weren't making money before, then they look at it as you weren't really hurt by this.
Your earnings were actually better during the pandemic
This part is just a theory.
I'm actually kind of surprised that the application for either of these programs doesn't ask for information about your business DURING the pandemic. You would think that would be part of how they determine if you were actually hurt by it.
So that's why I say this is just a theory. Your current finances aren't part of the application process. So on paper, it wouldn't look like it makes a difference.
But again, they have the ability to look into your banking information and your taxes. And if their computers are cruising through your bank account information, and they see that you have a LOT more money coming in from Grubhub and Uber Eats and Doordash than you were having the year before, that could be an indication that you aren't really being hurt by all this.
Tips for Independent Contractors to help qualify for business relief like EIDL and PPP
Here are a couple of quick thoughts.
Develop a business mindset.
This is not a job. It's a business.
You are not applying for this aid as an individual. This is not an individual stimulus check. This is aid to help you if your business was hurt by the pandemic.
Treat your business as a business.
Keep records. Pay attention to the terminology. Treat the application as a business application with very clear and defined terms.
That doesn't mean you have to know the terms, or that you have to know accounting or antyhing like that. But if you're not willing or able to do those things yourself, you have to find someone who is. That's part of running a business.
Start treating this like a business.
Ask yourself: Has my business truly been hurt by this pandemic?
If the available business for you has dried up because of the pandemic, then definitely yes, you've been hurt by it. Rideshare comes to mind. Operating a business where people aren't able to come in due to being shut down comes to mind.
If you had to stay home to watch kids because schools were shut down, you were hurt by this. Maybe you felt like you were at risk getting out there making contact with so many people and you felt like it was safer to stay home. Or perhaps you have someone in your household at risk and you don't want to risk bringing it home to them. I think you could definitely say yes, your business was hurt by this.
For a lot of people in the delivery space, business has never been better. However, if you have not seen a drop off, and especially if you have seen an increase in earnings, can you really say your business was injured by this whole thing?
If you know yourself that you haven't really been hurt, that might be a good indication that the SBA could come to the same conclusion.
If as an independent contractor for Grubhub Doordash Uber Eats etc your EIDL loan was denied, you can appeal.
I found an interesting article talking about reasons that loans might be denied and the appeals process.
You should be given a reason that your loan was denied.
Be honest. Is that legitimate?
If it's based on credit history, you probably already know whether it is.
But maybe they state you aren't really running a business. Maybe they say you weren't really hurt by the pandemic. What can you do to demonstrate that you ARE running a business or you WERE hurt? Profit and loss statements, bank records, any kind of documentation.
It is possible to appeal. The article linked above provides some information to help get started with that appeal. Maybe you want to check with your accountant to see if they are able to help with the appeal or they know someone who can.
The bottom line is, EIDL and PPP are business programs to help your business IF your business was hurt by the pandemic. Are you a business? Treat it that way. If you treat it that way and you were legitimately hurt by this, your chances of getting the aid are much higher.