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How the CARES Act Can Help Your Small Business

The COVID-19 coronavirus outbreak has caused a world of difficulty and hardship for individual Americans, and large and small businesses alike. In response, Washington passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. At $2.2 trillion, it marks the financial rescue package in U.S. history, and it includes hundreds of billions of dollars for individuals, companies, public health organizations, and state and local governments.

Small businesses (companies with fewer than 500 employees) have been particularly hard-hit. That’s why the CARES Act has allotted some $377 billion in various types of aid for these companies – mostly in the form of temporary loan programs.

If your company is in the unfortunate position of needing assistance right now, we’re here to help. Read on as we discuss a few of the most important ways the CARES Act is trying to assist small businesses.

Paycheck Protection Program

Most of the CARES Act stimulus comes via $349 billion allocated to the new Paycheck Protection Program (PPP). This short-term Small Business Administration loan program serves small businesses and nonprofits with fewer than 500 employees, as well as companies with fewer than 1,500 employees in some industries. The goal is to provide enough funds to primarily help them pay for up to eight weeks of payroll (including benefits). However, some of the money can go toward other costs, including rent and utilities.

Companies can borrow either 2.5x their monthly payroll costs, or up to $10 million, at a fixed rate of 1%. That interest rate will begin accruing immediately, though loan payments are deferred for the first six months.

These loans are fully forgivable, however, as long as the money is used for certain costs. At least 75% must be used for payroll, while a maximum of 25% can go toward rent, utilities and mortgage interest.

Businesses also must either keep employees on their payroll, or rehire laid-off employees by June 30, for the loans to be forgiven.

Small businesses with fewer than 500 employees, as well as sole proprietorships, can begin applying as of April 3. Independent contractors and self-employed individuals can apply starting April 10. The Treasury Department says companies can apply through SBA 7(a) lenders, as well as other participating organizations including credit unions and Farm Credit System institutions. You can download an application form at SBA.gov.

Economic Injury Disaster Loan Program and Advance

Some $10 billion has been allocated to the already existing Economic Injury Disaster Loan (EIDL) Program to provide loans and advances.

The EIDL program can provide relief to companies experiencing “a temporary loss of revenue” in the form of loans of up $2 million to cover operating expenses. However, unlike PPP debt, these loans must be repaid. Interest rates are 3.75% for businesses and 2.75% for nonprofits.

Of particular note: Borrowers also may request an emergency advance of $10,000 that is expected to be granted within three days. This advance does not need to be repaid. Also, companies might receive this advance even if their borrowing application is denied.

You can apply for EIDL relief at SBA.gov immediately.

Other CARES Act Provisions

The CARES Act also includes several other means of relief for small businesses.

For instance, employers can now defer paying the employer portion of Social Security taxes through the end of this year. Half must be paid by Dec. 31, 2021, and the other half must be paid by Dec. 31, 2022.

Businesses that have been fully or partially shut down by a government agency because of the coronavirus outbreak, or have experienced a significant decline in gross receipts, also qualify for tax credit. This 50% refundable credit applies to employee wages, maxing out at $10,000 per employee. The credit is applicable to all employees who remain on payroll at businesses with 100 or fewer workers. However, it’s only applicable to inactive employees at companies with 500 or fewer workers.

Learn More About the CARES Act and Other Relief for Your Small Business

Washington has shifted into overdrive to help buoy struggling small businesses. The government is offering various forms of relief not just in the CARES Act, but via other bills and actions. That includes pushing back tax deadlines.

McManamon & Co. is a firm serving small- and midsized businesses that offers services such as tax preparation and business consulting. We also can help you figure out the various relief avenues open to you. That includes figuring out the various tax credits available to you, as well as loan applications, grants and more.

Small businesses can’t afford to wait in this environment. Give us a call at 440.892.9088 or contact us online today and learn about how we can help.

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