Economic Relief for Small Businesses

Paycheck Protection Program

The third phase legislation passed by Congress to afford relief for the coronavirus crisis is the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed March 27, 2020. Its centerpiece for assistance to small business is the Paycheck Protection Program. This program provides $349 billion in forgivable loans for small businesses. “Forgivable” means you don’t have to repay. And the only credit requirement is that you have documented payroll history. Act quickly to investigate whether this loan is right for you by CONTACTING YOUR BANK.

What size business qualifies?

  • All that have 500 or fewer employees.

How much can my business borrow?

  • 2.5 times monthly payroll, but not more than $10 million.

How do I proceed?

  • See your bank. Private lenders can accept applications (sample form) starting April 3, 2020. Lenders issue the loans; the federal Small Business Administration (SBA) guarantees them 100%. Don’t be deterred by loan delinquencies you may have. Lenders understand. If your bank cannot help, contact our office for a referral.

When can I apply for a loan?

  • Starting April 3, eligible small business and sole proprietorships will be able to submit applications to SBA qualified lenders. On April 10, independent contractors and self-employed individuals will be able to submit applications to SBA qualified lenders.

My business doesn’t have collateral, and I don’t want more personal liability.

  • No problem. These loans do not require either a personal guaranty or collateral. Only documented payroll history is required.

How can my business qualify for full forgiveness of a payroll protection loan?

  • Three requirements:  For the eight weeks after you receive your loan —
  1. Spend at least 75% of the money on payroll and the rest on rent, interest and/or utilities.
  2. Employ the same number or more people than during one of these two time periods: Feb. 15 – Jun. 30 of 2019 or Jan. 1 – Feb. 29, 2020.
  3. Don’t reduce any employee’s total wages, compared to the most recent full calendar quarter, by more than 25% (except for employees paid over $100,000 per year).

Which permissible use of the borrowed money should my business prioritize?

  • Rep. Bishop strongly recommends that you cover payroll before any other expense.

My business already laid off employees or cut wages. Am I out of luck?

  • No. If you rehire laid off employees and resume paying wage rates of 75% or more by April 26, 2020, you still qualify for full loan forgiveness.

Am I required to make up lost tips to employees to receive forgiveness?

  • No, but you can if you wish and are able to.

How will the loan forgiveness process work?

  • The lender must determine if a borrower has met the forgiveness criteria and grant forgiveness within 60 days of the borrower’s request.

What are the terms of any unforgiven balance?

  • Two years maturity. Interest at 1% per annum. Payments deferred at least six months.

Is the loan forgiveness treated as income to my business for federal tax purposes?

  • No.

But I’m self-employed. Am I out of luck?

  • No. A self-employed individual can receive a paycheck protection loan.

What about non-profits, are we eligible?

  • Charitable/educational/religious organizations under IRC 501(c)(3) and veterans organizations under 501(c)(19) are eligible. Other non-profits, including chambers of commerce, are not.

2.5 times payroll is just insufficient to keep my business afloat during the crisis. What other help is available?

  • Your business may also be eligible for an Economic Injury Disaster Loan. Unlike paycheck protection loans, which banks extend, and the SBA guarantees, disaster loans are made directly by the SBA, not by banks. Disaster loans can provide up to $2 million of working capital to small businesses to overcome a temporary loss of revenue. The SBA can make a $10,000 advance available within three days after approval of an application, but a disaster loan probably will take longer to arrange than a paycheck protection loan. If you wish to pursue a disaster loan, go to SBA.gov.

Is an SBA disaster loan forgivable?

  • No.

Can I obtain both a paycheck protection loan (and have it forgiven) and an SBA economic injury disaster loan?

  • Yes, but the disaster loan proceeds cannot be spent on the eight weeks of payroll, interest, rent and utilities eligible to be paid for with the paycheck protection loan.

*Reflects Dept of Treasury guidance on March 31, 2020. This is not legal or tax advice. Consult professionals*

 

Treasury Department and SBA guidance about Paycheck Protection Loans and other resources for small business in the coronavirus pandemic can be found linked below:

Please see below for additional resources and detailed information courtesy of House Committees:

 

SBA Debt Relief

 

The SBA is providing broad debt relief for businesses with existing loans. The SBA will cover principal, interest and fees on all existing loan payments for 6 months for:

  • 7 (a) loans
  • 504 loans
  • Microloans

The SBA will also cover these expenses for new borrowers who take out new loans for the next six months. While this debt relief is automatic, you are encouraged to check with your lender.

 

Government Contracting

 

SBA is working with small businesses with federal contracts to ensure continuity of operations.

  • 8 (a) Business Development loan recipients should stay in touch with their Business Opportunity Specialist to get information on how the SBA is working with federal agencies to maintain continuity of existing contracts
  • HUBZone participants are encouraged to contact the HUBZone Help Desk at hubzone@sba.gov or call 1-202-765-1264 access code 63068189# on Thursdays from 2-3pm
  • Women-owned Small Businesses are encouraged to visit www.sbs.gov/wosbready or write to wosb@sba.gov

Businesses that may not be able to perform their contract are encouraged to reach out to their contracting officer and seek extensions. The SBA Procurement Center has representatives can help small businesses in this process. The Procurement Center Representative Directory can be accessed here.  

 

Small Business Resources

 

If you are a small business owner and you are looking for additional help, the Small Business Administration as well as local organizations can be great resources during these challenging times. Below are a list of organizations that are available to help North Carolina businesses.

Small Business Development Center (SBDC), Women’s Business Center (WBC), or SCORE mentorship chapter- https://www.sba.gov/local-assistance/find/.

The  SBA North Carolina District Office https://www.sba.gov/offices/district/nc/charlotte

North Carolina Department of Commerce- https://www.nccommerce.com/business/start-business-north-carolina

Economic Development Partnership of North Carolina- https://edpnc.com/about-the-edpnc/

North Carolina’s Small Business and Technology Development Center- http://www.sbtdc.org/

NC Community Colleges Small Business Center Network- https://www.ncsbc.net/

Additional Paycheck Protection Lenders

In addition to the many banks that are distributing Paycheck Protection loans, the following financial technology (FinTech) companies are now participating in the Paycheck Protection Program. Below is a list of newly approved lenders as well as the links to access Paycheck Protection loans.

Participating FinTech Lenders:

Biz2Credit

BlueVine

Cross River

Divvy

Kabbage

FIS

Fundera

FundingCircle

Lendio

Nav

OnDeck

Paypal

Quickbooks

Ready Capital  

Square

Veem

Payroll Credit

 

The CARES Act provides a payroll tax credit for 50 percent of wages paid by eligible employers during 2019– including 501 (c)(3) non-profit organizations. To be eligible:

  • An employer must have had operations fully or partially suspended due to COVID-19; or
  • An employer must have experienced a 50 percent reduction in quarterly receipts

For an employer with 100 or fewer employees, all employee wages qualify for the credit. Employers with more than 100 employees can claim the credit against wages of employees who face reduced hours or were furloughed. Finally, the credit can be claimed up to the first $10,000 in employee compensation – including health benefits. 

Businesses can also defer payroll taxes with The CARES Act allows businesses to defer the payment of the employer share of payroll taxes through the end of 2020. Half of the deferment would be due at the end of 2021 and the other half due at the end of 2022.

An important caveat: those who receive SBA loans and utilize the loan forgiveness provisions are NOT eligible for an employee retention credit or payroll tax deferment.

 

Frequently Asked Questions about Payroll Credit & Small Business Tax Provisions

 

Can I claim an employee retention tax credit if my business has been fully or partially shut down during the COVID-19 crisis?

Yes. The CARES Act provides a payroll tax credit for 50 percent of wages paid by eligible employers during 2019– including 501 (c)(3) non-profit organizations. To be eligible:

  • An employer must have had operations fully or partially suspended due to COVID-19; or
  • An employer must have experienced a 50 percent reduction in quarterly receipts

For an employer with 100 or fewer employees, all employee wages qualify for the credit. Employers with more than 100 employees can claim the credit against wages of employees who face reduced hours or were furloughed. Finally, the credit can be claimed up to the first $10,000 in employee compensation – including health benefits. 

Can I delay payroll taxes during the COVID-19 emergency?

Yes, with exceptions. The CARES Act allows businesses to defer the payment of the employer share of payroll taxes through the end of 2020. Half of the deferment would be due at the end of 2021 and the other half due at the end of 2022. A important caveat: those who receive SBA loans and utilize the loan forgiveness provisions are NOT eligible for payroll tax deferment.

What other tax provisions are available?

The CARES Act allows businesses to use current net-operating losses to offset tax liabilities going back five years and receive a refund from the IRS. The income limitation on these losses would also be lifted. The active business loss limitation that applies to businesses organized as pass-through’s (S.Corps, LLC’s, etc.) would be suspended until next year. The amount of interest costs eligible to be deducted would be increased from 30% to 50%.