April 28, 2020
Updated on Tuesday, April 28, 2020
The federal government recently enacted the newest coronavirus aid bill, which provides $484 billion in total funding for small businesses, hospitals and coronavirus testing. This second round of funding includes:
- $320 billion for the Paycheck Protection Program (PPP): This funding replenishes the PPP, which ran out of funds last week. Learn more about the program in our PPP section below.
- $60 billion will be added to the PPP for small lenders and community banks: The funds will be split to help federally insured lenders and community financial institutions.
- $10 billion for Economic Injury Disaster Loan (EIDL) grants: These grants are a loan advance that provide up $10,000 of economic relief to businesses experiencing temporary difficulties. Read more about these grants in the EIDL section below.
Update provided by Zywave, Inc.
Updated on Tuesday, April 17, 2020
To help our policyholders understand the recently passed CARES Act, we have compiled information and resources on the three options available to small businesses.
Types of assistance:
Paycheck Protection Program (Loan to retain employees, pay rent, mortgage interest or utilities)
Economic Injury Disaster Loan (EIDL) Emergency Advance (Loan advance within three days)
Employee Retention Tax Credit (For businesses impacted by COVID-19)
Paycheck Protection Program
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The U.S. Small Business Administration will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities. The maximum loan amount is $10 million.
Who is eligible?
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private nonprofit organizations or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.
You can apply for the Paycheck Protection Program and the Economic Injury Disaster Loan (EIDL) Emergency Advance but you can’t get funds from both loan programs for the same purpose.
Repayment and loan forgiveness details
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. At least 75% of the forgiven amount must have been used for payroll. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Any amount not forgiven will need to be repaid within two years at an interest rate of 1% on any remaining balance after forgiveness.
How to apply
You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. You may want to start by checking with your company’s financial institution.
Economic Injury Disaster Loan (EIDL) Emergency Advance
You may be eligible to apply for an EIDL, which is a lower interest loan of up to $2 million and an advance of $10,000. The advance does not need to be repaid under any circumstance if it is used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
They are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.
The emergency advance grants provide a loan advance of up to $10,000 within three days of applying for the SBA Economic Injury Disaster Loan (EIDL). To access the advance, you first apply for an EIDL and then request the advance.
Who is eligible?
This program is for any small business with less than 500 employees (including sole proprietorships, with or without employees, independent contractors, and self-employed persons). Small business concerns and small agricultural cooperatives that meet the applicable size standard for SBA are also eligible, as well as most private nonprofits of any size.
A personal credit check is required for all owners with 20% or more ownership. A business credit report from Dun & Bradstreet is standard on Disaster Loans. However, if your application is turned down you can still keep the $10,000 advance.
You can apply for the Paycheck Protection Program and the Economic Injury Disaster Loan (EIDL) Emergency Advance but you can’t get funds from both loan programs for the same purpose.
Repayment details
Emergency advance does not need to be repaid. Loan payments are deferred for a year. The loan has a repayment period of 10 years. Interest rates are determined by the loan administrator but are 3.75% or 2.75% for nonprofits.
How to apply
The application is online on the U.S. Small Business Administration website. The estimated time for completing the entire application is two hours and ten minutes.
Employee Retention Tax Credit
Businesses can take advantage of a new employee retention tax credit for employers who are closed, partially closed, or experiencing significant revenue losses as a result of COVID-19. This new employee retention tax credit is a 50% tax credit for the first $10,000 of compensation, including the employer portion of health benefits, for each eligible employee. Compensation does not include paid sick or family leave for which the employer is reimbursed under the Families First Coronavirus Response Act. The credit only applies to wages paid after March 12, 2020 and before January 1, 2021.
Who is eligible?
Private employers, including nonprofits, carrying on a trade or business in 2020 that have operations partially or fully suspended as a result of orders from a governmental authority due to COVID-19, or experience a decline in gross receipts by more than 50% in a quarter compared to the same quarter in 2019 (eligibility ends when gross receipts in a quarter exceed 80% compared to the same 2019 quarter).
With respect to tax-exempt organizations under 501(c) of the tax code, the requirement to be partially or fully suspended applies to all operations of the organization.
Employers who receive a Paycheck Protection Program (PPP) loan are not eligible for a tax credit.
Credit details
The refundable credit is applied against the employer portion of payroll taxes. The Treasury Department will develop a process for employers to receive an advance payment of the tax credit.