What Does it Mean to "Pay Yourself" with a Stabilization Grant?

As more and more states start rolling out the Child Care Stabilization Grant, many providers wonder what it means to be able to use some of this money to "pay themselves."

These Stabilization Grants are meant to provide financial relief to family child care providers (and centers) to cover business costs associated with COVID-10 and to help stabilize their operations.

This grant represents a substantial financial benefit to all providers! This is not a loan, it's a grant that you don't have to pay back.

According to federal guidelines, the grants can be used for a variety of purposes:

• Personnel costs

• Rent, mortgage payment, utilities, insurance

• Facility maintenance and minor improvements

• COVID supplies and equipment

• Other goods and services necessary to maintain or resume child care services

• Mental health supports for the provider, children and employees

Your state may offer further clarification on how the grant money can be spent.

The one big expense on this list is "personnel costs." What does this mean?

Basically this means that you can give the money to yourself. Instead of spending it on something else on this list, you can take the money and use it for any purpose you want. You can put it aside for your retirement, pay off debts, take a vacation, make a home improvement, purchase business equipment, whatever!

Sometimes states will use language that says you can use the grant money to "pay yourself." This is a strange concept for most family child care providers (as it the phrase "personnel costs"). Many providers will say, "I don't have employees, so what does it mean to "pay myself"? If you are a corporation, then you are being paid as an employee and it's easy to understand that the corporation is "paying" you. But, when you are self-employed, any money you receive as the business owner from parents, the subsidy program or the Food Program is automatically yours to do with what you want.

For purposes of the Stabilization Grants, you can use this money to keep for yourself, just like these other sources of income. There are three ways you can "pay yourself."

First: If you have more than one bank account, transfer money from the bank account where the Stabilization Grant was deposited, into another bank account. It can be a checking or savings account, it doesn't matter. It can be a business or personal account, it doesn't matter. Make a note on your bank records or separate piece of paper that says, for example, "On February 10, 2021, $5,000 was deposited in my bank account #_______ from the Child Care Stabilization grant. On February 12, 2021 I transferred this to my bank account #______ as payment to myself".

Second: Write yourself a check. Put "Stabilization Grant payment for myself" in the memo line.

Third: Keep the money in the bank account where it was initially deposited. Write a note in your check register or on a separate piece of paper, noting the date the money was deposited and identify it as such, for example, "On February 10, 2021, $5,000 was deposited in my bank account #_______ from the Child Care Stabilization grant. I am applying $______ of this money as payment to myself".

It's as simple as that. You may not be required to submit any records to your state on how you spent your grant money. Your state may or may not put a limit on how much of the grant you can use to "pay yourself." If you need further clarification, ask your state if you should be keeping any additional records to show that you paid yourself.  If you are audited by the state, any one of the above records will protect you.

Lastly, once you "pay yourself" you don't have to spend the money. You can keep it as an emergency fund or let it sit in a bank account for some future need. 

I know that for some providers this concept of "paying yourself" sounds too good to be believed. It's very unusual to be told you can receive money and keep it for yourself. But you can! The idea behind the Stabilization Grants is to help keep you in business so you can continue to provide high quality care. So, take advantage and apply for this grant when it becomes available in your state.

Tom Copeland - www.tomcopelandblog.com

Image credit: https://californiahealthline.org/news/everything-you-need-to-know-about-block-grants-the-heart-of-gops-medicaid-plans/