President Donald Trump on Friday signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a stimulus package intended to support the U.S. economy during the ongoing coronavirus pandemic.
CARES provides, among other things, business loans, tax relief and expansion of unemployment benefits.
The latest UMA Town Hall session reviewed how to access this assistance quickly through the Small Business Administration. Here are some of the highlights from the conversation, led by Ken Presley, UMA’s vice president of legislative and regulatory affairs and industry relations/COO.
The Paycheck Protection Program (PPP) is the largest loan provision in CARES and is intended to promote the retention of employees by providing funds for short-term expenses. It’s available to businesses with fewer than 500 employees and in an amount not to exceed 250% of average monthly payroll.
Loans are eligible for forgiveness to the extent the money is used for payroll, rent, utilities and mortgage interest obligations. Loan repayments can also be deferred for a period of time. The eligible loan period is retroactive to Feb. 15 – June 30, 2020. The loans will be guaranteed by the SBA and will likely be issued by most FDIC-insured banks. Operators wishing to take advantage of these loans should contact a participating lending institution to inquire about the application process.
The key to accessing these funds is to maintain employee compensation, pay medical leave insurance premiums and other normal expenses. As part of the loan, typical collateral requirements and personal guarantees are being waived, Presley said.
“I was talking to somebody yesterday, and they said, ‘I don’t have any payroll,’ and my response was, ‘Get them back on the payroll because Congress sees you as the quickest spigot to get money to people, rather than for them to have to be going through the state employment process,’” Presley said.
Business tax relief
CARES also offers business tax relief. Employers may now defer 50% of 2020 employer payroll taxes until Dec. 31, 2021, with the remaining 50% due Dec. 31, 2022. This 50% refundable payroll tax credit is for employers who had their business fully or partially suspended. Net operating losses from 2018, 2019 and 2020 can be carried back to the previous five years to offset taxable income. This will generate an immediate rebate on taxes already paid. Businesses will now be able to deduct 50% of interest expenses from 2019 and 2020 (up from the current 30%).
Emergency unemployment compensation is a temporary federal unemployment assistance program through Dec. 31, 2020, to extend the time frame individuals may receive unemployment payments from 26 weeks to 39 weeks and supplements standard payments by $600 per week. It also provides payments to those not traditionally eligible for unemployment benefits, including self-employed individuals, who are unable to work as a direct result of the coronavirus public health emergency.
COVID-19 Economic Injury Disaster Loan provides an advance of up to $10,000 to small businesses that is essentially a grant. It does not have to be repaid. The other components of the EIDL are similar to the PPP; however, there are no forgiveness provisions. Some of the EIDL provisions can be rolled over to the PPP.
“Even if they later determine that you don’t qualify, you will not have to give that money back,” Presley said. “So that $10,000 is just a fast infusion to get money into your company.”
Most of the stimulus funds earmarked for small businesses will be funneled through the SBA, which is better equipped than most agencies to be a spigot for this money. The federal agency is trying to quickly ramp up its website, which has crashed several times under the recent demand. In the meantime, Presley suggests going online in the middle of the night, when traffic is at its lightest.
Apply online or with lender
A big question among operators on the Town Hall call is whether to apply online or work with an SBA lender.
For the Paycheck Protection Program, you must use SBA-approved or -preferred lenders. Since this is a new program, SBA has to issue rules and procedures and must do so in 15 days. Meanwhile, some SBA lenders are taking names and email addresses and notifying borrowers when the program is ready.
“Operators should be deciding on the lender they are going to use,” Presley said.
The COVID-19 Economic Injury Disaster Loan is applied for online directly with SBA. The process has been significantly pared down for the applicant since last week, consistent with the directives of the bill.
John Grzywacz, CEO of CIT Signature Transportation in Ames, Iowa, recommends becoming your best advocate. That begins by looking for resources, whether through the local chamber of commerce, or a nearby university or community college. Another option is the local Small Business Development Center (SBDC), which is funded through SBA and is tasked with helping business owners with these issues.
“Look to see if there’s someone around you that can become your circle of advisers and help you navigate this,” Grzywacz shared during the session.
Presley added that he has heard from vendors who have offered their services to help members their paperwork. Operators who are interested in those services should contact him for details.
Join UMA for the next online Town Hall meeting Thursday at 2 p.m. ET on the Zoom platform to discuss the most current issues that matter to operators. The April 2 meeting is a “Focus on Getting Funds for Your Business.”