You have probably been following the progress of the stimulus bill through negotiations all to the way to signing. Now that it’s been signed into law, small business owners have access to new resources to help them weather these extraordinary circumstances.
There are two provisions in particular that you may need to take action on quickly.
Families First Coronavirus Response Act (FFCRA)
The Families First Coronavirus Response Act requires certain employers to provide their employees with paid sick leave or expanded family and medical leave for reasons related to COVID-19. The new provisions will apply starting April 1, 2020 through December 31, 2020.
There is an exemption available for certain businesses with fewer than 50 employees. Additional clarifications are expected from the Department of Labor in the coming days.
Coronavirus Aid, Relief and Economic Security (CARES) Act
The CARES Act has many provisions that could affect your business. Here are 3 highlights that you can start with.
The program provides funding for extended unemployment insurance and expands people’s access to file (for example, independent contractors and gig workers are now eligible). Workers can receive up to $600 per week in additional benefits for up to 4 months.
- Net Operating Losses
The 80% rule is lifted, and business owners can now carry the loss back 5 years. Talk to your tax accountant or financial planner to understand how this rule may apply to your situation.
- Paycheck Protection Program
The Paycheck Protection Program, or PP for short, is an important piece of the CARES Act for small business owners. It provides for the Small Business Administration (SBA) to make loans to eligible businesses. Any portion of the loan that’s used to cover payroll, rent, and utilities is eligible for loan forgiveness.
How does it work?
Business owners can apply for a loan at any bank that’s affiliated with the SBA. Lenders will be looking at the following:
- Whether the borrower was in operation before February 15, 2020
- A certification that the uncertainty of current economic conditions makes the loan request necessary
- A certification that the borrower will use the loan proceeds to maintain payroll or make mortgage, rent, or utility payments
Additional documentation of payroll costs and payments to independent contractors may be required; clarifications are expected in the coming days. Keep in mind that the lenders will likely not be looking at whether the borrowed sought and was unable to obtain credit elsewhere, or require a personal guarantee or collateral. All emergency loads will be guaranteed by the Federal government.
What should you do if you want to apply for an emergency loan?
Reach out to your contact at the local bank. As of the time of this writing, the banks are still waiting for guidelines from the SBA. However, it’s a good idea to “get in line”.
Begin to gather the documentation that may support your loan application.
Review this Coronavirus Emergency Loans Small Business Guide and Checklist from the U.S. Chamber of Commerce for more details.
And, as always, know that you can reach out to us with questions.