Small businesses have frequently been recognized as the backbone of the U.S. economy. They employ almost 50 percent of the country’s workforce, and the United State’s economic growth depends on their collective success. Unfortunately, the COVID-19 outbreak has severely threatened the operation of many small businesses. Many business owners have to shut their doors, and in turn, layoff workers.
Earlier in March, The Trump Administration provided economic relief for small business owners through Emergency Injury Disaster Loans (EIDL). These loans allow businesses to have immediate access to cash so they can take care of payroll and other pertinent business expenses.
However, as of last week, Trump took an additional step and signed a $2 trillion coronavirus bill into law. Entitled the Coronavirus Aid, Relief, and Economy Security (Cares) Act, the bill includes some significant provisions for small business owners.
Here is what you need to know about what is included in the bill, and where you can go to take advantage of these services:
The Paycheck Protection Program – This program allows for $350 billion to be dispersed to small businesses as emergency loans, which enable companies to maintain payroll through June. This program also increases the convenience of obtaining these loans as businesses can request them through banks, credit unions, and other lenders. Companies can request up to $10 million with no higher than four percent in interest. The expectations are that lenders will defer fees and payments on principal and interest for no less than six months and no more than one year.
- Who is eligible? – Small businesses with fewer than 500 employees, select types of business with less than 1,500 employees, 501(c)(3) nonprofit organizations with less than 500 employees, some 501(c)(19) veteran organizations, along with some self-employed, freelance, and gig economy workers. Businesses without personal guarantee or collateral can also receive a loan if they were operational on February 15, 2020.
- These loans are eligible for forgiveness – As long as businesses pay employees for the eight weeks after the origination of the loan—excluding costs for any yearly compensation above $100,000—companies can combine this amount with mortgage interest, utility payments, and rent, for this portion to be forgiven.
Expansion of the EIDLS – This was the initial money that was allocated to small businesses to manage payroll and business expenses. Here is how this program is being expanded:
- More companies are eligible – EIDLs are now available to tribal companies, employee stock ownership, and cooperatives that employ less than 500 employees as well as all nonprofit organizations. Organizations categorized as 501 (c)(6)s, independent contractors, and sole proprietors also have access to these loans.
- Cash Advances – Borrowers can receive a $10,000 emergency cash advance that can be forgiven if spent on the same expenses mentioned in the Paycheck Protection Program as well as supply chain costs or outstanding obligations.
- Flexible approval procedures – EIDLs can be approved with the use of credit scores, and amounts requested that are less than $200,000 can be fulfilled without a personal guarantee.
- Business Tax and Family Leave Changes – Some tax policies and additional family leave protections have been put into place that can benefit small businesses and their employees.
- Employee retention tax credit – If COVID-19 partially or fully impacted a small business, or if gross receipts declined by 50 percent when compared to the same quarter of the previous year, companies can receive a tax credit.
- Delay of payroll tax payments – Businesses and self-employed professionals can delay payroll tax payments until 2021.
- Increase of tax deductions – Businesses can increase their business interest expense deduction on tax returns for 2019 and 2020.
- Special provisions for hospitality and alcohol sectors – Hospitality and those serving alcohol can take advantage of additional tax expenses if they meet specific criteria.
- Redirection of money – Businesses can keep money initially set aside for payroll taxes with the expectation that they will receive refunds from the Treasury Department for sick leave and paid FMLA leave as outlined by the Families First Coronavirus Response Act (FFCRA).
Related: How the Coronavirus Relief Stimulus Package Affects Small Businesses
The federal government is instituting a variety of methods to keep small businesses afloat. If you are a small business owner and require these services, be sure to check out this website for information on how to apply for loans: Coronavirus (COVID-19): Small Business Guidance & Loan Resources, you can also call the U.S. Small Business Administration at
1-800-827-5722. For more details about the Act itself and some additional potentially helpful tax provisions within it, visit Coronavirus Aid, Relief, and Economic Security Act: What Small Businesses Need to Know. While we do our best to interpret these provisions, we always advise readers to take a look at the bill itself for more information and to confirm details.
Image credit: https://people.com/politics/trump-signs-cares-act-puts-defense-production-act-into-effect/
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