Our last two updates discussed important financial information within the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).This is information you should know if you have a qualified retirement plan OR if you have required minimum distributions (RMD).
In this update below, we highlight financial relief programs available for small businesses. Since many of our clients here at Total Financial Concepts are small business owners, we took it upon ourselves to research, organize and highlight the most pertinent information for business owners.
If you know of someone who may benefit from this information, we encourage you to share this with them.
Option 1: Federal Disaster Loans For Business Owners
The U.S. Small Business Administration (SBA) is offering low-interest federal disaster loans (and a grant option) to be used for working capital to small businesses suffering substantial economic injury as a result of COVID-19. The purpose of this is to provide vital economic support to help overcome the temporary loss of revenue small businesses are experiencing. NOTE: This money is from the SBA’s Disaster Fund and is separate from the $350 billion set aside in the CARES Act for SBA-guaranteed loans processed by your bank, which is detailed in option 2. Below are Q&A highlights for option 1:
WHAT FINANCIAL ASSISTANCE IS AVAILABLE FOR MY BUSINESS?
The U.S. Small Business Administration is offering low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of COVID-19. The purpose of these loans is to provide vital economic support to help overcome the temporary loss of revenue small businesses are experiencing.
IS MY BUSINESS ELIGIBLE FOR THIS?
Any small business with less than 500 employees is eligible — as long as your business is not related to agriculture. There are a few additional qualifications as well; the full list of qualifications can be found on the first page of the application.
WHAT INFORMATION DO I NEED TO APPLY?
It's recommended (from various CPA and Law firms) to start compiling the information listed below, which will be needed to process these requests. NOTE: Please consult your accountant to discuss.
- 2019 IRS Quarterly 940, 941 or 944 payroll tax reports
- Last 12 months of Payroll Reports beginning with your last payroll date
- These 12 months of Payroll Reports should include the following:
- Gross wages for each employee, including the officer(s) if paid W-2 wages
- Paid time off for each employee
- Vacation pay for each employee
- Family medical leave pay for each employee
- State and Local taxes assessed on the employee’s compensation for each employee
- 2019 1099s for any independent contractors that would otherwise be an employee of your business (excluding 1099s for services rendered).
- Documentation showing the total of all health insurance premiums paid by the Company Owner under a group health plan for all employees and owners.
- Document the sum of all retirement plan funding that was paid by the Company Owner (exclude monies that came from the employees paycheck contributions). This includes 401K plans, Simple IRA, and SEP IRAs.
WHAT IS THE EIDL ADVANCE?
There is a provision in the online application to request to be considered for an Economic Injury Disaster Loan (EIDL) advance of up to $10,000. This loan advance will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid.
WHAT CAN I DO (AND NOT DO) WITH THE LOAN?
The working capital loans (including the grant) may be used only to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. The loans are not intended to replace lost sales or profits or to pay for expansion. Funds cannot be used to pay down long-term debt. They also cannot be used to consolidate debt.
HOW DO I APPLY?
The application is online. Learn more on the SBA website here.
Learn more on SBA website here.
Option 2: Federal Paycheck Protection Program
The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. This is a loan transaction your bank will handle through a guarantee by the SBA from the CARES Act funds.
IS MY BUSINESS ELIGIBLE FOR PPP?
Any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), 501(c)(3) non-profit organizations, 501(c)(19) veterans organizations, or Tribal businesses affected by coronavirus/COVID-19 is eligible.
*Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
*Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.
IS THIS LOAN FORGIVABLE?
SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Otherwise, this loan has a maturity of 2 years and an interest rate of 1%.
HOW DO I APPLY FOR THIS LOAN?
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Make sure you tell your bank/lender if you’ve applied for the SBA disaster funds, which will demonstrate that you’ve already taken steps to help yourself.
Learn more about the federal paycheck protection program here.
Option 3: NJEDA Support for Small Businesses
The New Jersey Economic Development Authority (NJEDA) has a portfolio of loan, financing, and technical assistance programs available to support small and medium-sized businesses. View the NJEDA existing products, programs and services on the NJEDA website.
To view more information for employers and small businesses, click here.