The COVID-19 pandemic has turned much of our world upside-down, not least of which is our economy. With lockdown orders and mandated closures plaguing businesses across America, it seems the brunt of the economic downturn is shouldered by small business owners. According to National Federation of Independent Business (NFIB) survey, 45 percent of small business owners reported they wouldn’t be able to operate more than a year if the economy didn’t improve. Grim tidings, to be sure. Luckily, the federal government has already begun their attempts to stimulate economy and protect citizens from financial ruin in the form of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act offers a few resources to help small business owners stay afloat during this uncertain time.
Paycheck Protection Program
Perhaps the most widely known element of the CARES Act is the Paycheck Protection Program loan (PPP loan). The PPP loan is one of the largest instances of economic stimulus for small businesses in recent history. Initially, businesses comprised of 500 or fewer employees could apply for a PPP loan to pay for payroll expenses during the pandemic.
Small business owners could apply for the loan through a federally insured financial institution for an amount not exceeding $10 million, depending on their monthly payroll costs. Congress designed the PPP loan with payroll in mind to prevent mass layoffs. However, recipients could also utilize the funding for other business expenses such as utility bills or rent.
One of the most attractive features of the PPP loan was its loan forgiveness clause. While it technically is a loan, the sum is forgivable as long as the business abides by a few regulations.
Unfortunately, many regarded the first rollout of PPP loans as a bit of a mess. Some larger businesses received millions in funding while small mom-and-pops were left with a few hundred dollars. However, Congress fine-tuned the eligibility requirements for the “second draw” of the PPP loan to allow a better opportunity for true small business owners to get a piece of the CARES Act pie. Applications for the second draw are open now!
Economic Injury Disaster Loan
If the PPP loan wasn’t enough for small business owners to stay on their feet during the economic downturn, the CARES Act also reimplemented the Economic Injury Disaster Loan (EIDL). The government reserves this loan for businesses in need of financial assistance during any kind of major natural emergency.
Each business is eligible for a smaller amount but it can be used for any business expenses including payroll. There is one stipulation for this loan. If the small business owner received the PPP loan, they must use the EIDL sum on different business expenses.
The EIDL is a low-interest loan without forgiveness, so only business owners who are confident in their ability to pay monthly loan payments should apply. However, deferment and forbearance options are available for those who qualify.
CARES Act Small Business Debt Relief Program
The CARES Act also provided much-needed relief for small business owners who had outstanding Small Business Administration (SBA) loans. The SBA will cover payments on SBA loans for six months following the passing of the CARES Act. Small business owners who take out new loans under the SBA are also eligible for coverage as long as they take out the loan within six months of the passing of the CARES Act.
CARES Act Tax Provisions for Small Business Owners
Finally, many small business owners should know the CARES Act offers one more boon: tax credits. For businesses affected by mandatory lockdowns or whose quarterly sales have decreased more than 50 percent year-over-year, the CARES Act allows a refundable tax credit of 50 percent of wages for employees kept on or furloughed during the pandemic. This credit will not apply to federally mandated sick time or parental leave taken by employees.
Unfortunately, this credit is only available to small business owners who did not receive a PPP loan.
Opening or Closing a Business in the Inland Empire
Running a business during the COVID-19 pandemic has been harrowing for thousands of business owners, even with the CARES Act. As such, many have unfortunately had to close their doors. For others, the pandemic has provided unique opportunities to fill a niche within their market. Whether you’re opening or closing a business, ProSe Legal is your resource to make the tedious legal paperwork easier. We offer a wide variety of business services to make the opening or closing of your business a breeze.
If you need assistance with any aspect of your business’s paperwork,
