On March 27, President Trump signed into law the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to address the financial repercussions of the COVID-19 pandemic in this country. The bill included $360 billion in funding to small businesses, co-authored by Senator Collins. Due to the extremely high demand for these programs, an additional $380 billion in new funding was authorized by Congress and signed into law by President Trump on April 24.
Financial assistance to small businesses included two forgivable loan programs — the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan programs (EIDL) — administered by the Small Business Administration (SBA). Applications for the PPP loan are made through local banks and approved by SBA, whereas the EIDL program applications are accepted online directly by SBA. The programs were set up to be on a first come, first served basis. The programs were so popular, that on April 16, the SBA announced that funds for both loan programs had been exhausted. When funding for these programs was initially tapped out, nearly 15,000 forgivable loans for small business loans had been approved in Maine totaling nearly $2 billion.
The PPP provides forgivable loans for small businesses to pay employees and cover some operating expenses such as interest on mortgages or rent (including boat loans), and utilities, for eight weeks if the business has been adversely impacted by the pandemic. The program supports all small businesses, including sole proprietors and contract workers, so you do not need to run payroll to qualify for this program. However, you do need to prove income, so small businesses that show a loss on their last tax filing do not qualify. The loan is forgiven as long as 75% of the funds are used to pay workers. If not, loan payments are deferred for six months and you have two years to pay off the loan at 1% interest. No collateral or personal guarantee is required.
The program has been so popular that the initial $350 billion funding to the program was spent out in just two weeks. Congress injected an additional $310 billion in funding of which $60 billion goes to smaller lenders to steer resources to businesses that typically have trouble getting loans. While many in Maine’s lobster industry have successfully applied for and received funds through this program, others have been left frustrated. Due to the extremely high demand and rapid roll out of this program, many banks will only accept applications from existing customers, and some banks will only accept applications from customers who hold business accounts. This meant that many lobstermen and sternmen have not been successful in applying for this program.
The EIDL program provides funds to small businesses suffering substantial economic injury as a result of COVID-19. These loans provide an emergency cash advance of $1,000 per worker, up to a maximum of $10,000, that does not need to be paid back. These loans are for working capital which includes fixed debts, payroll (unless covered through a Paycheck Protection Program loan), accounts payable, and other bills that can’t be paid. This program received $10 billion in the first round of funding, and an additional $60 billion in the second round.
Applicants who submitted their applications during the first funding cycle are being processed on a first-come, first-served basis. The SBA has not begun accepting applications for the second round of funding as of May 1.
The CARES Act also expanded eligibility for unemployment benefits, so lobstermen and sternmen may now qualify to receive pandemic unemployment assistance (PUA). Criteria to qualify have been expanded to include self-employed, 1099 contractors, sole proprietors and part-time workers who been adversely impacted due to the pandemic. The Maine Department of Labor (MDOL) experienced delays in rolling out unemployment benefits for self-employed, but began accepting applications on May 1. These benefits are retroactive. In addition, the CARES Act increased unemployment benefits by an additional $600 per week for up to four months.
Unlike the PPP program, lobstermen who did not show an income in 2019 still qualify for PUA unemployment benefits. In fact, lobstermen are able to take advantage of all three programs, as long as the benefits from each programs are not used to pay the same expense. For example, if you get a PPP loan to pay yourself, you cannot use EIDL loan proceeds to pay yourself, or receive unemployment benefits for the weeks you are being paid through the PPP program.
There is no “work search” requirement to receive PUA unemployment benefits through the end of May. However, if work becomes available to you, you are required to take it. You can also receive partial unemployment (PUA) benefits. MDOL requires that you certify your income each week to document if you were able to earn income in any given week. If you earn income while you are on employment, you simply don’t get a PUA check for that week.
The CARES Act also included a stand-alone provision with $300 million dedicated to help fishermen who are struggling in the face of collapsed markets through the Federal Fisheries Disaster Program. The money will be distributed by National Marine Fisheries Service (NMFS) to aid individuals, fishing communities, aquaculture businesses, processors or other fishery-related businesses. Funds may be awarded on a rolling basis and within a fishing season to ensure rapid delivery of funds. While NMFS has not yet announced the mechanism to distribute funds, it is anticipated that they will be distributed through the states.
According to the NOAA website, “NOAA Fisheries understands the urgent need for these funds, and our overriding goal is to distribute the assistance as quickly as possible. To that end, we are working daily with the Department and our federal partners to finalize a process to expedite the distribution of Sec. 12005 funds, consistent with the direction provided by Congress.”
Senator Susan Collins and other members of Maine’s Congressional delegation were instrumental in ensuring that the CARES Act addressed the needs of small businesses and specifically, the needs of fishermen and their families.