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EIDL vs PUA vs PPP: Understanding Covid-19 Pandemic Relief Options for Independent Contractors with Grubhub Doordash Postmates Uber Eats etc.

Quick Reference: Tax and PPP help.

Which of the Covid-19 pandemic relief options for businesses is the best for independent contractors for gig economy apps like Grubhub, Uber Eats, Doordash, Postmates, Lyft, Instacard, etc.?

There really is no best. It depends on your situation and how this has impacted you.

When the government passed the CARES act, they introduced programs that can help individuals and businesses. Because the independent contractor is in a unique position, stuck somewhere between business owner and individual status, there are portions of both that can help the self employed contractor. There can also be some challenges.

We'll look at each of the programs and see how the three different Covid-19 pandemic relief programs can help the independent contractor who contracts with gig economy companies like Doordash, Uber eats, Grubhub, Postmates, Lyft, Instacart and others.

Which Covid-19 pandemic relief option is right for independent contractors with Uber eats, Doordash, Grubhub, Postmates, Lyft and other gig economy apps?

Paycheck Protection Program.

I mention this one because there's an important deadline just a few days away from the writing of this article:

Application deadline for paycheck protection program: June 30, 2020.

The paycheck protection program is a forgivable loan that was designed to encourage businesses to keep employees on their payroll. Allowances were made for self employed individuals to participate in the loan, to provide “Owner compensation replacement.”

In other words, if you are not able to earn or your earnings as a self employed individual are reduced, you can utilize this program to get the funds to replace this program.

The loan amount is limited to 2.5 months of your business profits (line 31 of your Schedule C) for 2019. If you had enough expenses (particularly miles) that you had little or no taxable income, you would not be able to borrow much with this program.

The up side is that by all accounts it appears that the entire loan can be forgiven.

Originally it was only 8 weeks worth of profits that could be forgiven for self employed individuals (a little less than 3/4 of the loan amount) meaning the rest would have to be repaid over 2 years. The US government passed a measure on June 5 that appears to have extended that to the full 2.5 months.

More reading on the Paycheck Protection Program:

How can the PPP Loan help provide COVID-19 pandemic relief for independent contractors with Grubhub Doordash Uber eats Postmates Lyft Instacart etc.?

We go into more depth on the program, how it works and how you can apply in the following articles.

Pandemic Unemployment Assistance (PUA).

Another Covid-19 pandemic relief option for Grubhub, Uber eats, Doordash contractors and others is the Pandemic Unemployment Assistance program.

As a business owner, there are no guarantees for what you earn. You get no minimum wage. There is no overtime. Either you make money or you don't. You also don't have to pay unemployment insurance – unfortunately that means you don't qualify for unemployment benefits.

The Pandemic Unemployment Assistance portion of the CARES act extended unemployment eligibility to independent contractors. If you are unable to continue delivering as a result of the pandemic you may qualify for unemployment assistance.

This benefit is a bit more nebulous than others. You still have to go through your state. Each state is different in how they handle applications and what they'll approve.

I have good news and bad news about how much you can receive.

A lot of states pay around 50 to 60 percent of your regular income. Like the Paycheck Protection Program, income is based on your Schedule C profits. If you drive a lot of miles or have enough expenses to offset most of your income, you would not qualify for much.

The good news is, the PUA assistance added an additional $600 per week for anyone receiving unemployment. Even if your unemployment assistance is only $1 per week, you can receive the additional $600. If you don't qualify for any regular unemployment, you don't qualify for the $600.

The bad news is, the $600 per week additional runs out on July 31 (unless the Senate and Congress can agree on a provision to extend that measure). Unless things change, you may not get that additional benefit for long if you are just now applying.

More about Pandemic Unemployment Assistance for independent contractors

We write more about the PUA program for independent contractors with gig economy apps like Grubhub, Uber Eats, Doordash, Lyft, Postmates, Instacart and others.

You can learn more about the department of labor guidelines here.

Economic Injury Disaster Loans (EIDL) with a $1,000 Grant

How can the EIDL provide Covid-19 pandemic relief for independent contractors with Uber eats, Lyft, Grubhub, Doordash, Postmates, Instacart etc.?

The CARES act also made the Economic Injury Disaster Loan (EIDL) portion of Covid-19 pandemic relief available to independent contractors for gig apps like Grubhub, Doordash, Uber Eats, Lyft, Postmates, Instacart and others.

The EIDL is a long term loan program. They also added an instant payment aspect where between $1,000 and $10,000 is sent to the borrower immediately and does not have to be repaid (with one exception). Independent contractors can receive $1,000 for that grant. If your business has employees, you can receive $1,000 for each employee up to $10,000.

The loan can be paid off over a 30 year term at 3.75% interest. There are a number of stipulations on how you can use that money, so caution would be advised.

Is this a good option for an independent contractor?

The grant portion can be a nice shot in the arm for contractors. If you need cash to pay your expenses for your business and have a harder time paying them due to the Covid-19 pandemic, and are okay with paying it back over time, this could be an option for you.

I think it's a little unclear how restricted we are as independent contractors in how the funds are used if we take the loan. This is supposed to provide for operating expenses, and payroll CAN be such an expense. For self employed individuals, owner income replacement takes the place of payroll under the PPP. I don't know if that allows a little more flexibility here.

You can see more about how to apply for this particular loan here.

Can an independent contractor with Doordash, Grubhub, Postmates, Uber Eats, Lyft, Instacart or others use more than one program?

Each program has a different purpose.

The PUA is meant to help the individual by expanding unemployment benefits

The PPP is designed to help businesses keep people on their payroll (and keep people off of unemployment).

I think the best way to describe where the EIDL fits in is, it's a loan that allows you to cover expenses that are not covered by the PPP loan.

Understanding these three things helps get a feel for how these can be used together. Granted, it's a bit trickier for business owners. That's especially true for the sole proprietor who qualifies as both an individual AND as a business.

Can you take PPP and PUA at the same time as an independent contractor?

No.

Maybe.

Probably not.

Most of the information out there says no, but I also see some areas where there may be wiggle room.

There's one side where taking both could be seen as double dipping. PPP is meant to provide cash to keep people paid so they don't have to go on unemployment. See how it doesn't make sense to get money on one side so you don't have to take unemployment, and then still take unemployment?

Could you do one at a time?

I found an interesting take on on an article that mentions this take from an owner of a travel agency: “You can accept a PPP grant, suspend your Unemployment for eight weeks, and then go back on.”

I can kind of see that reasoning. With the PPP, you are receiving a benefit that covers a time period (originally 8 weeks, now 24). If the time period where you are covered by PPP doesn't overlap with when you get unemployment, you may not be in violation of anything.

May not. I don't know. I won't speak for the government one way or the other.

It might be a tempting strategy for some, considering that the $600 additional is going away in another month. The problem is that the PPP deadline is June 30, so you can't wait until the end of July to take that loan and go off unemployment then. The other risk if you try that is, can you get back on unemployment once the 8 or 24 weeks runs out?

Can you take PUA and EIDL at the same time?

This one is a bit gray.

Getting the LOAN on the EIDL shouldn't be an issue with unemployment insurance. If you have to pay it back, it really isn't any form of income for you. Accepting the $1,000 grant though could impact your eligibility for unemployment, at least temporarily. This article by Brian Thompson in Forbes makes the point that getting the EIDL grant could be considered as an “other paid leave benefit” which some states may determine makes you ineligible for unemployment.

I think this is something you'll need to take into consideration if you are on unemployment: do you have to report that EIDL payment? I can't find a definitive answer. I'd love to hear from you if you have one. Different states may handle that differently.

My thinking is, does it make sense to take a $1,000 grant and lose the $600 plus your normal benefit for a week? Even if the grant is higher than that weekly total, is that few dollars worth the risk? I can't answer that for you.

Can you take PPP and EIDL at the same time?

This is one you can do.

My understanding is they are meant to complement each other. That the idea on the EIDL is to be a loan to cover costs not covered by PPP. There's also a stipulation where you can use PPP funds to refinance part of an EIDL loan (which the PPP loan is a lower interest rate).

There is one area of overlap you need to know: If you took out the PPP AND you got the $1,000 grant on the EIDL, that's $1,000 of your PPP loan that cannot be forgiven.

The other thing to remember is that you cannot use funds from both to pay for the same thing. That's another form of double dipping.

This too has a bit of a grey area for independent contractors. Does that mean you can use the PPP for owner income replacement for the 2.5 months, but then you can use the EIDL loan to cover owner income replacement for the following months? And how exactly is that determined?

What's the best option for different situations?

Disclaimer: I am not a financial advisor or any kind of professional advisor. I'm a blogger writing out of my understanding of things. These are just my ideas. Do not take any of this as financial or professional advice. Use my thoughts as a starting place only, as food for thought. If you need professional advice, please seek out a professional.

Here are a few scenarios that I thought through, and my ideas about what makes sense:

You are completely unable to work due to the pandemic.

Either you are at risk, or someone you live with is at risk. Perhaps you're unable to get out because you have kids at home now with no options due to school and child care closures.

This might be the best scenario for Pandemic Unemployment Assistance. This especially remains true as long as the $600 per week is available.

You were denied for unemployment and unable to work.

If I found myself unable to do my gig work but was denied for unemployment for whatever reason, my first place to go would be the Paycheck Protection Program. The one drawback is that the PPP is based on taxable net income for your business. In other words it's earnings minus miles and expenses. It's supposed to cover 2.5 months but for a lot of us, that amount might only cover a few weeks of your expenses.

The EIDL loan might be an option. The initial application asks about GROSS income instead of NET. You may be able to take out more through the EIDL. Just understand you will have to pay it back. The good news is the 30 year term gives you time to get on your feet so you can do so.

Your ability to earn was reduced by the pandemic but you still prefer to earn what you can.

For those of us in delivery, things didn't come to as close to a full stop as they did with other gigs. There were a lot of deliveries happening. However, in some markets, the delivery companies like Grubhub, Uber Eats, Doordash and Postmates opened the floodgates to applicants. Sometimes too many drivers out there meant too few delivery opportunities for the individual courier.

This is me. I chose to stay home a few weeks. Some out of precaution, some because for a bit the market was getting too flooded with drivers. I didn't want to do unemployment. I have been saving to give myself paid time off so I was okay, but I went ahead and applied for PPP out of precaution. Right now it's all sitting in the bank in case.

You can't get unemployment and don't qualify for much PPP.

A lot of gig workers won't qualify for much.

One factor is that income taxes let you claim 57.5 cents a mile when our real cost is much less. That means a lot of drivers have little to no taxable income but still bring in enough cash to get by. PPP is based on the taxable income, so that might mean you don't qualify for very much.

Another factor is that it's based on 2-1/2 months worth of your 2019 self employment income. If you started mid year or didn't start delivery until 2020, you may not qualify for very much on the PPP loan.

At this point your only option if you need cash is the loan.

I'm not a big believer in loans. I'm working on paying down debt so I don't want to pick up more. For me, I'd rather avoid adding more. That's part of the reason the PPP funds are sitting in the bank, if at any point any of that needs to be paid back I can pay it back.

You may find yourself in a different situation. If you decide that you need to take some time to be able to pay it back, the EIDL gives you 30 years. It's something to get you by until things pick up again.

Final thoughts

I'd love to hear your thoughts, first of all. Have you taken any of these? Do you have insights you can add to this?

Government aid is always an interesting topic to me. I took unemployment once and lasted about a week. That said, I understand that people get in situations where they can't get by without it. The government rules about who can stay open and who can't have put a lot of people into that position, so it's appropriate they provide some aid.

I'm not sure how we're going to pay for it all – I worry for my grandkids, you know? (well, grandKID for now but there'll probably be more) But that's another topic for another time, or another blog. Probably not a blog I'll write but someone will, I'm sure.

If you're in a position where you don't need the aid, don't take it. If you do see yourself where something may become necessary, the window is getting smaller.

And as I write this it's especially small for the Paycheck Protection Program. As in, about four days. If you're going to apply, you'll want to apply soon.

Could this help someone else? Please share it.

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