A large number of various types of industries may have been negatively impacted due to the COVID-19 and the economic crisis. If you’re operating a business in the field of entertainment, it’s highly likely you’ve been affected by these repercussions as well. With individuals staying home and not going to concerts, movies, or small theaters, your business is probably incurring losses.
Fortunately, United States lawmakers passed the $2 trillion CARES act, which contains the Paycheck Protection Program (PPP). Acceptance into the (7) Paycheck Protection Program may provide you with a loan amount up to a maximum of $10 million. The use of funds must be for specific expenses including payroll, utilities, and rent.
Who Can Apply?
If your entertainment industry business is identified as a small business you may apply for the PPP Paycheck Protection Program. The loans are also 100 percent guaranteed by the United States federal government. If your business is related to entertainment niches such as film, music, media, performance art or you operate a zoo, the use of funds for the loan amount must be for qualified expenses. If you meet specific criteria, you may also eligible for tax-free debt forgiveness and may not have to pay the loan amount back that you received.
Covered Period and Terms for the Loan Amount
If you’re interested in the terms associated with Paycheck Protection Program loan forgiveness for the entertainment industry, you should know that your business may be eligible for a loan equal to 2.5 times your average monthly payroll costs paid in the prior 12-month period. The loan amount you can receive if you’re approved for acceptance into the (7) Paycheck Protection Program is capped at $10 million and you should not have to pay higher than a 4 percent fixed interest rate.
(7) Paycheck Protection Program Eligibility for the Entertainment Industry
To meet the requirements needed for (7) Paycheck Protection Program eligibility for entertainment industry businesses, your music, film, media or performance art business must have been operating before February 15, 2020, and meet these criteria:
- Self-employed individuals
- Nonprofit with less than 500 employees
- A company with less than 500 employees
If you’re operating a small theater, comedy club, or produce music videos, you may want to see if this aspect of the CARES act is right for you. For the PPP loans, you should be eligible for loan forgiveness if the use of funds is for the following:
- Rent
- Utilities
- Payroll costs, which can include retirement benefits, health insurance premiums, sick leave and payroll tax
- Mortgage or other debt interest originating before February 15, 2020.
Application Process and Acceptance Into the (7) Paycheck Protection Program
Applications to the Small Business Administration to receive Paycheck Protection Program loan forgiveness for entertainment industry companies will be accepted after the second round of funding is approved by the government. The first allocation of $349 billion was depleted. However, an additional $310 billion should be on its way to being supported by the federal government near the end of April.
It’s important to note that acceptance into the (7) Paycheck Protection Program requires your business to go through a bank that has a relationship with the Small Business Administration. The application process for PPP loans may also require you to supply your payroll information and a copy of your prior-year tax return.
Loan Forgiveness
One of the most significant benefits of receiving this loan may be the tax-free debt forgiveness it may provide. Operating in the radio, television, or music industry or trying to survive this crisis while your theme park is receiving no visitors can be challenging. Typically, debt forgiveness is taxed as income. Fortunately, for this unique circumstance, the federal government has decided to offer tax-free debt forgiveness for the PPP. Here at Fusion CPA, we work with entertainment industry companies seeking to apply for the PPP loan program. If your business is hoping to take advantage of Paycheck Protection Program loan and receive loan forgiveness our small business entertainment industry accountants are here to help answer your questions and possibly expedite the process. We have the resources to quickly respond to your needs. Contact us today at 404.955.7338.
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