The information available for relief from COVID – 19 for small businesses is staggering. Add to that that the information changes daily, it is no wonder the business owner is left reeling. Below, I will outline three of the most talked about programs with information aimed at the business of less than 100 employees; and where they are as of today’s information.
All three of these programs are designed to compensate the business for retaining employee and to keep them out of the unemployment compensation queue. The SBA is offering two of these programs:
The Paycheck Protection Plan and the Economic Injury Disaster Loan Emergency Advance. The third is from the Internal Revenue Service: Employee Retention Credit.
The Paycheck Protection Program (also known as the PPP or 7a) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
While this program began on April 3rd, and is available through June 30, 2020 per the website cited above, the program is already out of money. The SBA is no longer accepting applications. There are additional funding requests before Congress. The applications currently in processing will be addressed in a first come, first served basis.
For those of you waiting for funding, here are a couple of tips:
- This is a loan with a maturity of 2 years and an interest rate of 1% – stated on the SBA Website.
- The forgiveness is based on employers maintaining, or quickly rehiring, its employees and will require documentation!
- This loan is given by a bank, therefore be careful that institution does not try to switch you into a different product that is not forgivable. See #1, above.
Economic Injury Disaster Loan (also known as the EIDL or 7b) is an advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid.
This is a loan offered through the SBA. They have ceased accepting applications for this loan as well, as of the notice on their website today.
I am reminded of the old adage: if something looks too good to be true, it probably is. And free money looks too good to be true.
This brings us to the third program: The Employee Retention Credit from the Internal Revenue Service:
The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer’s employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS.
Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either:
- the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- a significant decline in gross receipts.
https://www.irs.gov/coronavirus/employee-retention-credit
A significant decline in gross receipts is defined as the first day in the first quarter of 2020 that an employer’s gross receipts are less than 50% of its gross receipts for the same calendar quarter in 2019. The “decline” ends when the gross receipts for the quarter are more than 80% of its gross receipts for the same quarter in 2019.
https://www.irs.gov/coronavirus/employee-retention-credit
This credit is NOT available to those employers who have received funds from the either PPP or the EIDL.
All three of these programs have significant rules, regulations and documentation requirements. The Kael Company, Inc. is here to help you navigate through the rules and organize the documentation. We are here to help you with strategy to survive these unprecedented times. And, we are here, as we always have been, to be in your corner and champion your business success.
Information gathered April 16, 2020 and presented by: The Kael Company, Inc.
