Small Business CARES Act and Families First Coronavirus Response Act
March 31, 2020
We believe our small businesses are vital to the economy and we are here to partner with you to insure your success. We will continue providing you up to date information to help your business. We anticipate getting more guidance from Congress in the near future. Please contact our offices at 562-495-3331 if you need any assistance.
On Friday the House passed the CARES Act and President Trump signed it into law immediately after. The next few weeks of action will be critical as federal, state, and local leaders work together to help our communities through the Coronavirus crisis.
Workers and businesses across the State have felt the economic impact of the Governors' "stay at home" order, implemented to slow the spread of the Coronavirus, and the CARES Act aims to help impacted workers through these trying times.
The “Paycheck Protection Program” provides eight weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. Please note – If the employer maintains payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities will be forgiven. This provision will help workers remain employed, and allow affected small businesses and our economy to recover quickly from this crisis. This proposal would be retroactive to February 15, 2020, to help bring workers who may have already been laid off back onto payrolls.
Here are some reference materials to help you understand the stimulus package for your business:
The Small Business Owner’s Guide to the CARES Act
If your small business is struggling due to the recent Coronavirus epidemic:
Your business may be eligible for a new Paycheck Protection Loan.
This 4% interest rate loan is 100% guaranteed by the SBA.
Who is eligible?
Businesses and 501(c)(3)s with less than 500 employees.
Physician practices are eligible, no matter how they are structured.
Where can you get this loan?
Any existing SBA lenders and any lenders that are brought into the program through the Treasury.
You should talk to your preferred financial lender to see if they qualify.
You can visit https://www.sba.gov/disaster-assistance/coronavirus-covid-19.
What can you use the loan amount for?
Payroll costs - Group health care benefits
Employee salaries - Interest on any mortgage obligation
Rent
Utilities
And any other debt obligations occurred before Feb. 15, 2020.
How much can you borrow?
The maximum amount is the lesser of $10 million or 2.5 times the average monthly payroll based on last year’s payroll.
How long will it take to receive the money?
The SBA has authorized lenders to process, close, and service loans without SBA approval, giving you the means to invest in your business immediately.
What if you can’t pay it back?
First, all payments on principal, interest, and fees will be automatically deferred for six months.
Second, for businesses that retain their staff up until June 30, 2020, this loan will be forgiven.
Third, guidance will be coming from Congress on any tax ramifications on forgiveness.
Can the entire loan be forgiven?
No, only the portion of the loan used to cover payroll costs, mortgage interest, rent, and utilities can be forgiven.
In addition, only 8 weeks can be forgiven.
Employee retention credit – How will this work?
The Employee Retention Credit provides a refundable payroll tax credit equal to 50 percent of up to $10,000 in wages per employee (including health benefits) paid by certain employers during the Coronavirus crisis.
The credit is available to employers.
Wages paid to employees during which they are furloughed or otherwise not working (due to reduced hours) as a result of their employer’s closure or economic hardship are eligible for the credit.
However, for employers with 100 or fewer employees, all employee wages qualify for the credit, regardless of whether they are furloughed or face reduced hours.
To prevent double-dipping, employers that receive Small Business interruption loans are not eligible for the credit. Additionally, wages that qualify for the required paid leave credit are not eligible for the credit.
Some additional resources can be found below:
Tax Foundation FAQ on CARES Act
SBA Coronavirus Guidance and Resource
US Senate Committee on Small Business
Disclaimer: The information contained in this newsletter is intended solely for general educational purposes. It is not intended for the purpose of providing specific legal, accounting, or other professional advice to any particular recipient or with respect to any particular jurisdiction. The Firm (1) makes no representations, warranties, or guarantees as to its technical accuracy or compliance with any law (federal, state, or local); and, (2) assumes no responsibility to any recipient of this document to correct or update its contents for any reason, including changes in any laws. Before using any information contain herein, you should formally retain tax professional knowledgeable to your financial situation.