Q: As a small business owner, what do I need to know right now regarding COVID-19 and financial relief for small businesses?
Small business owners should be aware of the Federal government’s pending Coronavirus Aid, Relief and Economic Security (CARES) Act, the SBA Economic Injury Disaster Loan program, and the Families First Coronavirus Response Act (FFCRA).
1. Coronavirus Aid, Relief and Economic Security (CARES) Act. The CARES Act, which was passed by the Congress and signed into law by the President on March 27th, 2020, includes provisions designed to provide financial assistance and relief to small businesses and workers impacted by the COVID-19 pandemic. The Act also includes provisions for cash payments (Recovery Rebates) to qualified individual income taxpayers. You will want to familiarize yourself with the CARES Act’s various financial assistance and relief measures for small businesses and workers, including the Paycheck Protection Program, the expanded eligibility of the SBA’s Economic Injury Disaster Loan (EIDL) program and Emergency Economic Injury Disaster Loan (EIDL) Grants. You can review discussions on the CARES Act’s various provisions at the websites below:
2. SBA Economic Injury Disaster Loan program. As of Wednesday, all states and U.S. territories have requested the U.S. Small Business Administration (SBA) issue an official disaster declaration for their respective jurisdictions due to the COVID-19 outbreak. An SBA disaster declaration allows for SBA assistance in the form of SBA Economic Injury Disaster Loans to impacted small businesses in each state and territory. Businesses will need to provide a tax transcript, financial statements, and a profit and loss statement to apply for a loan under the SBA Economic Injury Disaster Loan program. Further information regarding the application process for Economic Injury Disaster Loan assistance will be released once a declaration is made.
For information and resources on the SBA’s Economic Injury Disaster Loan program and the other SBA loan programs that may be considerations for your business, you can review information and resources on the SBA loan programs at the websites below:
Note that contrary to popular belief, the SBA does not provide loans, but merely provides loan guarantees on loans made by its lending partners (Banks, Community Development Organizations, Microlending Institutions and other lenders). There are several SBA loan programs, and the requirements for each program vary, but like other business loans, collateral, cash flow, credit history and personal guarantees are typical considerations with SBA guaranteed loans.
3. Families First Coronavirus Response Act (FFCRA). The Families First Coronavirus Response Act (FFCRA), which was signed into law on March 18th, 2020, mandates that certain employers provide their employees with paid sick leave or expanded family and medical leave for specified reasons that relate to COVID-19. The paid sick leave and expanded family and medical leave provisions of the FFCRA apply to certain public and private employers that have less than 500 employees. Certain small businesses that have less than 50 employees may qualify for exemption from the requirement to provide paid time off due to school or child care closures if the paid time off would put the viability of the business at risk. Employers covered by FFCRA qualify for dollar-for-dollar reimbursement through tax credits for qualified wages paid in compliance with the FFCRA.
Self-employed individuals who are affected by the coronavirus outbreak can claim refundable tax credits against their federal income-tax bill that includes the self-employment tax due. While these tax credits won’t provide immediate cash assistance for self-employed individuals, they will lower their 2019 federal personal tax liabilities and potentially result in a tax refund on their 2019 Form 1040 (since the credits are refundable) provided a self-employed individual qualifies for them.
Guidance for eligible employers will be released next week, as early as Wednesday, April 1st, 2020. You can review paid, family, and sick leave compliance and pending tax credit information for small business owners using the resources provided below.
As these programs develop, we look forward to providing you with further information to assist you and your business during this unprecedented time.