There’s a lot of talk about support for small businesses at the moment. But as we all try to get to grips with the changes coronavirus is making to our lives, it can be difficult to understand exactly what’s out there for you as a charter captain.
Famously, small business funding under the CARES Act ran out in record time, with much of it reportedly going to larger chains and multi-million dollar businesses. Now that applications have reopened with a second round of funding, many people are concerned about the same thing happening again.
Is there a way for charter fishers, often sole proprietors or businesses with just a couple of employees, to get in on this support? Yes, there is, and all signs suggest that you need to act fast to do so. Read on to find out more about what’s available for you today.
We’re going to walk through the main funding options available as Captain John, the sole proprietor of a charter fishing business. We’ll compare his experience with that of Captain Steve, who owns a fleet of three boats, employing two full time guides as well as himself. Then, we’ll see what’s available for both charter guides and what the government loan programs give them in practice.
Please note: FishingBooker is neither a legal nor financial advisor. We created this article based on research from what we consider to be reliable sources with the aim of making it easier to understand which loans are available, and how they apply to charter captains and guides. Please consult with your banking, accounting, and legal advisors for guidance about applying for any of the programs mentioned below.
The CARES Act – An Overview
At over $2 trillion, the CARES Act is the largest stimulus measure in recent American history. It aims to provide financial help for anyone affected by the coronavirus pandemic, including small businesses.
Three of the act’s provisions may be particularly relevant to both Capt. John and Capt. Steve:
- $300 million is set aside specifically for fisheries, under section 12005. This covers individuals in the commercial and charter fishing sectors.
- Two prominent loans are aimed specifically towards small businesses. These are the Paycheck Protection Program (PPP) and the COVID-19 Economic Injury Disaster Loan (EIDL). As of May 7, there are still funds available under the PPP program.
- The Economic Impact Payment entitles US taxpayers who earn up to $75,000 annually to a grant of up to $1,200. This is organized by the IRS and will be sent to eligible tax payers, with no application needed.
Funding For Fisheries
On May 7, NOAA announced the allocation of the $300 million available to fisheries under the CARES Act. The funds will be available depending on your business’s location and will be handled by interstate marine fisheries commissions, Puerto Rico, and the U.S. Virgin Islands.
Funds range from $1 million to $50 million per state or territory. Hard-hit Alaska and Washington state receive the largest share of the funding, at $50 million each.
Who’s Eligible for Funding
Charter/for-hire fishing businesses are considered eligible, as well as Tribes, commercial fishing businesses, qualified aquaculture operations, processors, and other fishery-related businesses. Businesses further down the supply chain, such as vessel repair businesses, are not eligible.
The condition for accessing the funds under the CARES Act is that you experienced a revenue loss of more than 35 percent compared to the last five years average.
Each individual state, Tribe, and territory determines who exactly is eligible consistent with the wording in the CARES Act.
Funding Timeline
Each interstate marine commission needs to develop a plan that will outline how to distribute the funds to fishery participants. Once this is approved by NOAA Fisheries, the states and territories will be able to start distributing the funds.
How to Apply
You should contact your state marine fisheries management agency to understand how to apply for the funds.
Find out more about allocations and applications by clicking this link.
The Payment Protection Program
PPP in a Nutshell
The PPP loan program’s funds are managed directly by approved banks, and the requirements are slightly more relaxed compared to other small business loan programs. With a low interest rate of 1% and potential forgivability, it’s an attractive option for many businesses. This also makes it competitive.
What You Get
The amount you receive depends on your average monthly payroll. Each small business is eligible for 2 months’ average monthly payroll costs, plus an additional 25% of that amount. These loans have a cap of $10 million.
How do you calculate payroll as a sole proprietor?
Your full earnings count as your payroll when you’re a sole proprietor, independent contractor, or freelancer. So while Captain Steve, who employs other captains, can submit his full payroll, Captain John, who’s a sole proprietor, will need to submit his own income and expense reports. He will also need some additional documentation, which we’ll outline in the application section below.
How do you calculate your average monthly payroll as a seasonal business?
The SBA states that you can refer to the period between February 15, 2019 (or March 1, 2019, depending on your preference) and June 30, 2019 to calculate the monthly payroll.
If you’re a new business, you can use the average monthly payroll costs from January 1 through February 29, 2020.
Say Captain John’s earnings were $1,000 in March, $2,000 in April, and $3,000 in May and June last year. He would use these numbers to calculate his average monthly payroll – which would be $2,250. That means he’s eligible for 2 x $2,250, plus another half of $2,250 ($1,125) – so he can receive $5,625 total.
As he also runs a seasonal business, Captain Steve would calculate his average monthly costs in a similar way, but looking at the full payroll for all his captains. In order for him to not have to repay the loan next year, he would need to prove that he spent at least 75% of the funds he received on payroll costs, and the rest on expenses such as rent and utilities.
Forgivability
You can apply to have this loan forgiven, meaning you don’t have to pay it back. This relies on you spending at least 75% of it on payroll during the 8 week period immediately after you received the loan, and spending the rest on fixed costs such as marina fees and utility bills.
Loan forgiveness is a little more complicated for sole proprietors like Captain John, whose payroll is their entire business earnings. As they usually don’t have deductible expenses for utilities and rent/fees, the US Chamber of Commerce says that they will only be eligible to have 75% of the loan forgiven, and may have to pay back the remainder.
So, John would need to pay back $1,125 of his $5,625 loan (plus the 1% interest) next year. This is because he’s only eligible for forgiveness for the part that covers eight weeks of average payroll costs.
Note that these funds must be spent within 8 weeks if you’re an employer such as Captain Steve. If your expenses are lower due to less business at this time, factor that into your decision of how well the PPP loan works for your business.
How to Apply
You apply for PPP loans through your bank. They have to be an SBA-approved lender to process the loan for you – if they’re not, contact the SBA to find one. Then fill in the form linked here.
As well as the application form, Captain Steve will need to provide payroll documentation.
If you’re a sole proprietor such as Captain John, you should bring your 2019 1040 Schedule C form, showing your self-employment income, as well as proof that you were self-employed in 2019, and proof that you were in operation in or around February 15, 2020.
Now we’re in the second round of PPP funding, more banks have become approved lenders, and $60 million has been allocated to smaller banks. This is good news for smaller businesses, who may find it easier to find an approved bank to process their application.
EIDL in a Nutshell
Note: The SBA is not currently accepting new applications for the EIDL.
The COVID-19 EIDL is designed specifically to give you economic relief if you lost revenue because of the pandemic. The loan itself includes a cash advance that doesn’t have to be paid back under any circumstances. The rest of the loan, though, is not forgivable and is repayable at 3.75% interest.
What You Get
Officially, these loans can be up to $2 million, but they have been unofficially capped at $15,000, not including the advance. They aren’t directly related to your payroll – instead, the total amount you receive will be determined by an SBA officer, who will contact you with an offer after you submit an application.
How much you receive in the emergency advance depends on the number of people you employ, at $1,000 per employee.
So, Captain John, a sole proprietor, is eligible for an advance of $1,000. Captain Steve, who employs two full time guides and himself, will receive a $3,000 advance. This part of the EIDL is capped at $10,000.
Can you apply for both the PPP and EIDL?
Yes, you can. If you do, the funds must not be used for the same purpose – and it’s vital that you document how you’re using them. You should clearly record which funds have been spent on fixed costs, such as marina or docking fees, compared to what has been spent on pay and salaries.
Calculating Your Earnings from FishingBooker
If you need details from us about the earnings you received from FishingBooker bookings in order to finish your tax forms and calculate your earnings, simply log in on your computer and go to your booking dashboard. Click “export to CSV” and enter the dates you need. You’ll then be able to download a spreadsheet which details your full earnings.
What Else is Available
There are other loans and support available, both from government and private providers. Many of these programs have set criteria, such as your location or business setup. We’ve outlined a few possibilities below, but it’s best to speak to your lawyer or a financial advisor to learn more about what’s available for your specific business.
Deferral of Payroll Taxes
If you don’t get a PPP loan, you may be able to defer payroll taxes until the end of the year under the Income and Payroll Tax Relief program. Half of the deferred taxes would be due in 2021, with the other half due in 2022.
Expanded Unemployment Insurance
The CARES Act also covers expanded unemployment insurance, which will be dispersed through unemployment offices. This is also available to people who can’t work due to the coronavirus, even if they aren’t traditionally eligible for benefits like this. Self-employed individuals, people with limited work history, and fishermen included.
Other Programs
If the loans under the CARES Act run out before you get a loan, or if you decide these don’t suit your business, it’s worth looking into private or state lenders. Here are a few of the options available.
- Facebook Small Business Grants Program
- If you employ at least one other person you may be eligible for a loan from Facebook. You need to have been in business for over a year and to be located in an area where Facebook operates. Check their website for more details.
- Kiva US Small Business Loans
- Usually, Kiva loans are available for borrowers who are either financially excluded or creating social impact in their communities. However, their eligibility criteria has been expanded for people applying due to COVID-19.
- Opportunity Fund COVID-19 Small Business Relief Fund
- This west coast loan is available for small business owners in California – particularly those who may not qualify for traditional funding, such as minority and women-owned businesses in low-income communities.
Whether your business is structured like Captain John’s, Captain Steve’s, or something else entirely, we hope you find a funding solution that will see you through. In the meantime, we’ll continue to work hard to bring customers your way.
Useful links:
- PPP Application form
- Treasury PPP loan application factsheet
- COVID-19 EIDL application (not currently available)
- In-depth guide to applying for the EIDL
- US Chamber of Commerce’s Emergency Loans Small Business Guide
- US Chamber of Commerce’s Independent Contractors’ Guide to CARES Act Relief
- SBA coronavirus relief options
- Find your local SBA office
- State by State Financial Assistance
- Atlantic States Marine Fisheries Commission Disaster Relief Resources
