Get to Know the CARES Act
We’re all doing our parts to stay safe and healthy. Unfortunately for small businesses, that means a severe strain on your businesses. Thankfully, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has passed, and will be available to distribute capital quickly and broadly to help your businesses stay open. Here’s how it’ll affect your business:
Paycheck Protection Program
One of the largest sections of the CARES act is the Paycheck Protection Program, which sets aside $350 billion in government-backed loans as a stimulus initiative for small businesses. It’s an emergency loan that can be forgiven when used to maintain payroll through June. This program is designed to help you keep your employees, or rehire employees that you’ve had to lay off due to aggressive social distancing measures and its impact on your businesses.
These loans are designed for businesses with fewer than 500 employees and nonprofits with fewer than 500 workers, as well as sole proprietors, self-employed individuals, freelancers, and gig economy workers. The maximum loan under the Paycheck Protection act is $10 million, with an interest rate no higher than 4%. Lenders are expected to defer fees, principal, and interest for no less than six months.
As long as you are using your loan to continue to pay your employees at normal levels, then the amount they spent on payroll costs, mortgage interest, rent payments, and utility payments will be partially or completely forgiven.
For more information on the Paycheck Protection Program, click here.
Changes to Economic Injury Disaster Loans
The CARES Act also expands eligibility for the SBA’s Economic Injury Disaster Loans (EIDLs). The disaster loan program was extended to all small businesses affected by the Coronavirus in early March, but the CARES Act is making it even easier to apply. Here’s how:
EIDLs are now also available to Tribal businesses, nonprofit organizations, and individuals operating as sole proprietors or independent contractors
EIDLs can be approved based solely on an applicants’ credit score
EIDLs smaller than $200,000 can be approved without a personal guarantee
Borrowers can receive a $10,000 emergency grant that can be forgiven if spent on paid leave, maintaining payroll, increased costs, mortgage payments, and lease payments
For more info on EIDLs and how to apply, click here.
Changes to business tax policy
In addition to loans, taxes and tax policies have been adjusted to ease the burden on businesses impacted by COVID-19. For example, businesses will be eligible for an employee retention tax credit if your business operations were fully or partially suspended due to a COVID-19 shutdown order or gross receipts declined by more than 50% compared to the same quarter in the prior year. You can get a refundable 50% tax credit on wages up to $10,000 per employee. Furthermore, businesses—especially those in the hospitality industry—will be able to write off costs associated with improving facilities or increasing cash flow. For more information on changes to tax and tax policy, click here.
Families First Coronavirus Response Act
The CARES Act has made changes in regards to paid sick leave, paid FMLA, and more. For example, Paid family and medical leave under the FFCRA is capped at $200 per day, and $10,000 total per employee. Furthermore, workers that were laid off after March 1, 2020 but then rehired, are eligible for paid FMLA leave provisions instead of needing to be an employee for 30 days.
Click here for more information on the FFCRA!
What else can you do?
For more information on how you can run your business more cost-effectively, check out our article, Adapting Your Business to Face Coronavirus.
More resources and information
We know it’s a lot to take in, and that you’re scrambling for information how you can stay open. We’ve compiled a list of information and resources for you to use during these turbulent and frustrating times. We will also continue to update this list as we get more information, so keep checking back!