Small Business Administration Disaster Loans for Artists and Songwriters

Artists often overlook the fact that they are running a small business and they do it old school–if you don’t make, you don’t make.  Cash basis taxpayers.  And speaking of taxpayers, the time of year you realize that you are running a small business is right about now at tax time.

So in the current crisis, you are probably having to shut down touring operations which for independent artists is at least a significant chunk of your annual revenue (see p. 27, fig. 5 of  Nikki Rowling’s Austin Music Census).  This is compounded, of course, by the streaming meltdown and its calamitous effect on independent artists.  For this post, we’re going to be less concerned with how we got here and more concerned with what to do right now.  But let it be said that the how we got here part will not be forgotten.

When you’re trying to figure out what to do right now, your list should start with the Small Business Administration disaster loans for small businesses and sole proprietors affected by the government’s stay home order.  (If you’re in Texas, and even if you’re not, you should consult the list of resources from the Governor’s Texas Music Office team who are doing a fabulous job keeping creators informed about resources available to them in the time of the virus.)  These loans require a disaster declaration from the federal government that includes your state.  According to the SBA website, all states qualify.  So if your business is in the US, you are able to apply.

Small business owners in all U.S. states, Washington D.C., and territories are currently eligible to apply for a long-term, low-interest loan due to Coronavirus (COVID-19).

The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.

Remember–if you are a working artist, especially through a touring company, artist-owned label, operate as a sole proprietor or have a band partnership or LLC, make records, sell records (digitally or physically), merch, run publishing or any of the usual commercial functions that artists engage in and file tax returns for, you are running a small business and you should consider applying for the SBA’s disaster loans.  (We’re going to revisit this after details come out about the CARE Act.)

Consult your attorney and accountant to get advice on whether the program is right for you, but if you decide to go forward here’s some basic information that may be helpful.  (Obviously, this is not intended to be legal advice or form any attorney-client relationship per our “Legal, Copyright and Comment Policy“.)

You can find the forms to fill out on this SBA page which will also require some supporting documents that you should probably have to hand, such as your last federal income tax return and year-to-date financial statements (SBA Form 413D) which you can probably run from your accounting software (think Quickbooks, not TurboTax for financial statements) or get from your accountant if you have one.

Note that bands who have a partnership or LLC agreement file Form 5, and sole proprietors (and there will be a lot of those, particularly songwriters and composers) should file Form 5C.  Even though these will be different forms the supporting documents are going to be similar.  You’ll notice that there are a few boxes that can be checked, you probably want the one “Economic Injury (EIDL”).  Remember “EIDL” which stands for “Economic Injury Disaster Loan”.  And remember–you are not applying for this loan because of anything you did wrong.  You are applying because there is a disaster and the government told you to shut down.

Also note that SBA will ask that you request a tax return transcript be sent to them directly from the IRS.   An IRS transcript is a short version of your tax return that essentially allows the SBA to confirm the information on your application that comes from your tax return.  That transcript will be sent directly to the SBA and you may get a copy of it as well.  Remember, this can take a little time for that round trip and also remember that whatever you say about your tax return and what’s on the transcript should match.  Work from a filed copy of your tax return and also be able to show the SBA that you filed in case the IRS can’t locate your return to generate the transcript (which happens).

The SBA will ask for other documentation as well which are listed under “Additional Forms” on the disaster loan page.  These are also listed under “Filing Requirements” on page 4 of Form 5 and on page 4 of Form 5C.

Like any other loan, you have to do the paperwork, so just put your head down and follow the directions.  It’s way easier than reading a Coltrane solo.