ECONOMIC RELIEF AND INCENTIVES FOR SMALL BUSINESSES
Congress has recently passed some emergency measures that give small employers several options to help weather the economic effects of the COVID-19 pandemic. Below are some of the details of a few of those options -
Immediate SBA Emergency EIDL Grants - These are $10,000 grants that will be available through your local bank (if an SBA authorized lender). Theoretically, businesses should be able to get the money within 3 days after applying. The grants can be used for providing paid sick leave, maintaining payroll to retain employees, meeting increased material costs, making rent or mortgage payments, and repaying obligations which cannot be met due to revenue losses.
Forgivable SBA 7a Loans Paycheck Protection Loans - These will also be administered through your bank. Under this program, the bank will lend you up to 250% of your average monthly payroll costs or $10,000,000, whichever is less. The SBA is guaranteeing 100% of these loans. The interest rate cannot exceed 4%. Payments, including principle, interest, and fees can be deferred for 6-12 months, and the SBA will reimburse banks for loan original origination fees. After you get your loan, you will be able to apply for loan forgiveness to the extent the loan proceeds were used for covered payroll costs, mortgage interest, rent, and utility payments during the 8 week period following the loan disbursement.
Traditional SBA Economic Injury Disaster Loans – These are the most familiar SBA loans. They are not part of a new program, but that program has been expanded recently. Under the program, the SBA can provide up to $2 million in loans to meet financial obligations and operating expenses that a small business would have been able to meet had the COVID-19 pandemic not occurred. The loan amount is based on your actual economic injury and your company's financial needs, regardless of whether the business suffered any property damage. The interest rate is currently about 3.75% but cannot exceed 4 percent. The term can be as long as 30 years.
Tax Credit to Fund Paid Sick Leave.
a. If you have an employee who is sick with COVID-19, and you pay them sick-leave, you can get a FICA tax credit (employer share only) equal to the lesser of wages plus health care costs or $511 per day for up to 10 days.
b. If you give sick leave to an employee who has a sick family member, the credit is $200 per day, up to a maximum of $10,000.
Employee Retention Credit - If a government order requires you to partially or fully suspend operations, or if your gross receipts have declined by certain thresholds, you can receive a payroll tax credit equal to 50% of employee compensation up to $10,000 (per employee) paid between March 12, 2020 and January 1, 2021.
In both cases, you should be able to deduct the amount from your payroll tax deposits or recover a refund when you file your quarterly payroll tax returns.
While these are challenging times for many small businesses, there is help out there. Please give us a call if you would like to discuss these options.