Submitted by guest author Winnie Sun, financial adviser, founding partner of Sun Group Wealth Partners, and Intuit customer.
During the early phases of the economic meltdown caused by the COVID-19 pandemic, the federal government passed the CARES Act. It was the first of several measures enacted to help the nation get back on its feet while many businesses were shuttered and people were advised to stay home to avoid spreading the virus. But those measures were found to be just a starting point, especially for small businesses, so, the government added $310 billion to the original $350 billion for the Paycheck Protection Program (PPP).
On June 5, the government passed the Paycheck Protection Program Flexibility Act (PPPFA). The new law is aimed at providing procedural relief to small businesses — those with 500 or fewer employees — across the country that are trying to recover from the effects of the pandemic. It also should help businesses who received a PPP loan earlier increase their chances of having the loan forgiven.
There are several ways the new act builds some flexibility into the original Paycheck Protection Program:
- It cuts to 60% the portion recipients must use on payroll, down from 75%.
- It allows businesses six months to use the money instead of two.
- It extends a June 30 deadline for companies to rehire employees furloughed during the shutdown.
- It gives recipients a longer period to repay loans.
- It allows companies that are receiving loan forgiveness to defer paying payroll taxes.
But there are other things small business owners can — and should — consider, to help protect themselves and their customers and employees.
First, be sure to have a good business continuity plan in place. Like a good emergency preparedness plan for your home, a continuity plan for your business can make things go a lot smoother during an unexpected disaster and could make the difference between surviving or not. Many organizations were ill-prepared for the pandemic and its economy-shattering effects.
It was found that many companies had not paid much attention to risk management and are now struggling. This is a challenging time for so many businesses. As we learn more about the business effects of the pandemic, many businesses are learning the importance of being prepared financially and the importance of having a gameplan should the traditional business model not be viable. How can businesses continue to thrive if they can’t be in the office if they can’t be in the same physical space with their employees and customers long term?
It may seem self-evident, but small business owners should take care of themselves and their employees during this health crisis. Set an example by following CDC guidelines and encourage employees to do the same. Try to be flexible about your expectations during this crisis, especially around child care and other family issues employees may be having.
Look over your business finances and determine your most pressing expenses. Which ones might be deferred or renegotiated? Creditors and, yes, employees, might be willing to be more flexible knowing we are in a pandemic that is causing economic stress to many. How much cash do you have in reserve, and is it possible to build reserves by selling assets or borrowing money?
If you find you do need some help from the government to get your small business through this crisis, then consider starting with the aid offered through the federal government — Coronavirus Aid, Relief and Economic Security (CARES) Act, and its Paycheck Protection Program.
In addition to small businesses, veterans organizations, Tribal businesses, and certain nonprofit organizations, individuals who are self-employed and independent contractors are eligible for aid under the program if they meet program size standards and certain other eligibility requirements. The Treasury Department and the Small Business Administration have issued some rules and guidance to help you determine whether to apply.
Some things to keep in mind:
- The free Intuit Aid Assist tool, via a short, personalized, questionnaire, can help you navigate relief offered through the CARES Act and understand what you might be eligible for.
- You can apply directly at https://disasterloan.sba.gov/ela/ there is no cost to apply, nor is there an obligation to take the loan once it’s offered. You can borrow up to $25,000 on an unsecured loan and repayment can be automatically deferred for 12 months. Loan funds can be used for eligible payroll costs and certain eligible non-payroll expenses (such as rent).
- Even if your business already has an existing SBA Disaster Loan, you can still qualify for an Economic Injury Disaster Loan for needs related to the pandemic. Borrowers can get up to $2 million, with a 3.75% interest rate for small businesses and 2.75% for most privately-owned companies and nonprofits, in terms of up to 30 years. Eligibility depends on the size, type of business, and its financial resources.
- There are also a number of business tax breaks available — some $650 billion in all! Some are outright tax cuts, including a credit of up to $5,000 for each employee being paid not to work. There is also an employee retention credit for eligible companies and tax-exempt organizations; that includes companies that furloughed employees but are still paying their health benefits. That benefit is available to companies of any size. https://thehill.com/policy/finance/domestic-taxes/495587-irs-companies-who-receive-ppp-loans-will-not-qualify-for-tax
- Some other benefits are available besides tax cuts, including deferred payment of FICA payroll taxes, which also applies to the self-employed. Another benefit is the expansion of net operating loss and related carryback rules. Some involve retroactive changes meant to get cash quickly into the hands of employers.
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Please refer to the latest guidance from SBA and Treasury to confirm current program rules and guidance. PPP funding is made available to businesses located in the United States. Given the large demand for additional authorized Paycheck Protection Program funds, not every qualified Paycheck Protection Program applicant will receive a loan.
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