As the DJ industry continues to hemorrhage money in the absence of income, help is on the way for DJ business owners — be it multi-op or single-op — through the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress last week.
We spoke to Jerry Bazata, “DJ Answer Man” and loan officer at a bank in Maine, about the legislation, designed to provide loans of up to $100,000 to business owners that can be transferred to grants — provided certain conditions are met.
DJ Times: What provisions of the CARES Act can DJs look to for relief?
Jerry Bazata: If you are self-employed and you’ve been reporting income, you do have the ability to qualify for up to $100,000 under the CARES Act. Also, for DJs, there is the Disaster Relief Program which is another loan but it’s at a low interest rate.
And then there’s also the Emergency Fund, an emergency bridge loan that allows you to pay for interest you owe on a loan, which can be forgivable at some point. We’re still getting more information. So those are the things that are available out there.
DJ Times: What should DJs do right now?
The banks are going to be inundated and they’re going to really rely on borrowers to have all their financial information in house. Just simply filling out the application is not going to be enough. You’re going to have to provide backup documentation — payroll records, W2s, tax returns, things like your mortgage bills, your interest payments on your loans, what you pay in self employment tax and your health care benefits. So you want to start working with your accountant. You want to start working with your bookkeeper to start to gather that information so that once the banks are accepting the applications, you’ll be able to send them the backup documentation they need to verify the amount that you’re asking for. There’s going to be an onslaught across the industry, everybody’s going to be vying for this money. And we’re going to work as quickly as we can. But the more complete applications — once we know what a complete application looks like — the faster the banking industry will be able to respond to you.
DJ Times: Of the three loan programs that you outlined, are they all forgivable?
They are forgivable if you use it in the way that’s intended, which is to support payroll, and to support interest payments, rent payments, and keeping your healthcare benefits, keeping your employees. For the single self-employed individual, they probably are going to more look at the Disaster Relief Loan, because they may not have the income or they may not have the backup documentation to qualify for the other loan.
And again, once we get some more information on the SBA guidelines, we’ll be able to counsel people to get better information on what the actual qualification measures are. For example, this is guidance from the SBA:
For sole proprietors, independent contractors and self employed individuals the sum of payments of any compensation to or income of a sole proprietor or independent contractor, that is wage commission income net earnings for self employment or similar compensation that is in an amount that is not more than $100,000 in one year as prorated for the covered period.
So, basically what we’re interpreting that as: If you have income that you’re losing, you can go back to your tax records for the covered period which is going to be from February 15 2020 until December 31 2020. That’s what we know so far. Once the SBA drills down further we can get a better idea. So for the sole proprietor, if you’re having your health insurance that you’re paying through your business, interest on mortgage obligations incurred before February 15, rent under lease agreements in force before February 15, utilities for which service began before February 15 — that’s what the money can be used for.
DJ Times: For Disaster Relief, how much could a DJ business owner get for that?
Under the Payday Program, it’s up to $100,000 for self employed individuals under the covered period. If you’re a multi op and you do have payroll, it’s two and a half times the average monthly payroll over a 12 month period.
We’ll know more by the end of the week as to exactly how business owners can deal with this and how the banks are going to look at what information we’re going to have to collect, what we’re going to need from you, how this whole program is going to work. There are agreements that have to be drafted. So the banking industry is working very quickly on that. One of the things I caution as a banker is that what you’re reading in the news and what you’re hearing released in the press is at a very high level, and we’re working diligently in the financial community to try to meet those expectations, but it is going to take time because this is this is new for those in the small business world. It’s also new territory for us in the banking industry.
DJ Times: If the loans are not forgivable what are the terms?
The terms of the loan would be very, very light — you can pay it back over 10 years at an interest rate as low as 4%.
You know, at the DJ Expo in 2019 I’d said to business owners we’re going to have a recession. We never imagined it would be something like this pandemic. But I’m hearing a lot of businesses are going to survive. They’re doing the right things. They’re finding ways to do stuff. I’m talking to DJs that are finding these little fill-in gigs.
But it’s going to hurt. I probably would say there’s there’s going to be about a quarter of our industry that’s going to find employment elsewhere. It’s unfortunately a hard lesson.
But I think overall if we just kind of keep our heads — you look at banks are offering deferment or mortgage deferments out there, giving you a chance to kind of reduce your expenses. I know landlords have said they’re working with tenants. If we can get this under control, and we can reopen up our doors in May I think it’d be OK. If this thing lasts through the summer, it could be absolutely devastating for our country. And I think the powers that be realized that
I think if you had three months worth of expenses in a business account, you’re going to survive. Any less than that, it’s going to be a struggle. And you’re going to either be forced to liquidate assets, or you’re going to be forced to take a loan. If you have six months’ expenses stashed away, you’re going to be absolutely golden.
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