Economic Injury Disaster Loans & Emergency Economic Injury Grants
The CARES Act includes $562 million for loans and $10 billion for grants, which are currently available and can be applied to online through the Small Business Administration. SBA.GOV
These grants provide an emergency advance of up to $10,000 to small businesses and private nonprofits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). This money does not have to be repaid even if the business is denied for the loan.
The SBA Economic Injury Disaster Loans are up to $2 million with interest rates of up to 3.75% for companies and up to 2.75% for nonprofits.
To access the advance, a small business — again 500 employees or fewer — first must apply for an EIDL and then request the advance.
The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
The Emergency Economic Injury grants are available from Jan. 31-Dec.31, 2020. The grants are backdated to January to allow those who have already applied for EIDLs to be eligible to also receive a grant.
Employers and Small Business
Employers Paid Sick Leave (Required)
Economic Injury Disaster Loans & Emergency Economic Injury Grants
Paycheck Protection Loans (Apply Here)
Deadline June 30, 2020 to apply
Employers Paid Sick Leave (Required)
Deadline April 30, 2020
Applies to first 80 hours (ten days) of Stay At Home Order
• For an employee who is not able to work as a result of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, his/her employers can get paid sick leave credit from the IRS. Coronavirus paid sick-leave credit is provided for the eligible employers, who may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay. Paid sick leave credit for employers can be up to $511 per day and $5,110 in the aggregate, for a total of 10 days period.
• For an employee who is not able to work as he/she is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, his/her employers can get paid sick leave credit from the IRS. Coronavirus paid sick-leave credit is provided for the eligible employers, who may receive a refundable sick leave credit for sick leave at two-thirds of the employee’s regular rate of pay. Paid sick leave credit for employers can be up to $200 per day and $2,000 in the aggregate, for a total of 10 days period.
• An additional tax credit is provided to the eligible employers which is determined on the basis of the costs to maintain health insurance coverage for the eligible employee during the leave period.
How it Works
• Employers are required to withhold from the federal income taxes paychecks and the Social Security and Medicare taxes share of their employees. This is done when the employers make payments to their employees. After then, the employers are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
• As per the guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be eligible to retain an amount of the payroll taxes equivalent to the amount of qualifying sick and child care leave that they paid, instead of depositing them with the IRS.
• The payroll taxes that are available for withholding include withheld federal income taxes, the employee share of Social Security and Medicare taxes, as well as the employer share of Social Security and Medicare taxes with regard to all employees.
• If the cost of qualified sick and child care leave paid is not covered by the available payroll taxes, employers will be eligible to file a request for an accelerated payment from the IRS. For this purpose, the agency is expecting to process these requests within two weeks or less. All the details of expiated, new procedure regarding this matter will be announced by the IRS next week.
CARES Act Paycheck Protection Program (Not what you might think, should be renamed as "Help keep me afloat through this Pandemic Loan")
Through the Paycheck Protection Program, the Small Business Administration (“SBA”) has the authority to provide 100% federally backed loans through December 31, 2020 to help eligible businesses pay operational costs such as payroll, rent, and utilities. If a business satisfies certain conditions, portions of the loans are forgivable.
Eligibility Threshold
Businesses (including, sole-proprietors, independent contractors, and other self-employed individuals) with fewer than 500 employees are eligible for the Paycheck Protection Program. The 500-employee threshold includes all employees, including full-time, part-time and any other status. There are some limited exceptions to the 500-employee eligibility requirement for certain industries, such as businesses in the hospitality and food sectors that have multiple locations, which can have up to 500 employees per physical location of the business. In addition to this basic eligibility threshold, a lender providing a loan under the Paycheck Protection Program is required to consider whether the business: (i) was in operation on February 15, 2020, and (ii) had employees or independent contractors for whom the business had paid salaries, compensation and payroll taxes.
Covered Period:
Throughout the Paycheck Protection Program, the term “Covered Period” is used. Covered Period is defined as the period from February 15, 2020 and ending on June 30, 2020.
Maximum Loan Amount Available
During the Covered Period, an eligible business’s maximum loan amount is based upon the business’s average total monthly payroll costs incurred during the one-year period before the date of the loan. An adjustment to this one-year period is available for businesses with a seasonal workforce. During the Covered Period, each eligible business may receive up to 2.5 times its average monthly payroll costs subject to a $10 million limitation. Certain payroll costs are excluded in calculating the maximum loan amount, including:
Allowable Uses of Loan Funds
During the Covered Period, an eligible business can use the funds obtained through the Paycheck Protection Program for the following categories:
- payroll costs;
- cost related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
- employee salaries;
- interest payments on any mortgage;
- rent and utility payments; and
- interest payments on any other debt obligations that were incurred before February 15, 2020.
Loan Forgiveness
Businesses receiving a loan through the Paycheck Protection Program are eligible for loan forgiveness. The amount of forgiveness cannot exceed the principal amount of the loan, but may equal up to a business’s costs during the 8 weeks following the date of the loan’s origination for the following categories:
- Payroll costs;
- Interest on real or personal property mortgage obligations in existence before February 15, 2020 and incurred in the ordinary course;
- Rent under a lease agreement in force before February 15, 2020; and
- Utility payments, including electricity, gas, water, transportation, telephone or internet, for which service began before February 15, 2020.
- The amount of loan forgiveness is subject to reduction based on a business’s decline in headcount or wages. Declines in headcount or wages between February 15, 2020 and April 26, 2020 will not trigger a reduction in loan forgiveness if the business reverses the decline and returns to pre-decline levels by June 30, 2020.
- Loan forgiveness will not be included in a business’s taxable income.
Other Key Features of Loans Obtained through the Paycheck Protection Program
No Collateral or Personal Guarantee.
- Unlike the typical approach to collateral and personal guarantees with SBA loans, collateral and a personal guarantee are not required for a loan obtained through the Paycheck Protection Program, except if the funds are used for non-allowable uses.
Loan Fees.
- Typical SBA loan fees are waived for a loan obtained through the Paycheck Protection Program.
Deferral of Payments.
- Payments of principal and interest on a loan obtained through the Paycheck Protection Program are deferred for a period of six months to one year.
Lack of Prepayment Penalties.
- A loan obtained through the Paycheck Protection Program is not subject to a prepayment penalty.
Maximum Rate and Term.
- The maximum rate of interest that can be charged for a loan obtained through the Paycheck Protection Program is four percent. The maximum term of a loan obtained through the Paycheck Protection Program is ten years from the date on which the business applies for loan forgiveness.
Coordination with Other Federal Support.
- If the business has obtained an Economic Disaster Injury Loan, the business cannot obtain a loan under the Paycheck Protection Program for the same purpose.
Payroll Tax Credits and Payment Deferrals.
- A business obtaining a loan through the Paycheck Protection Program will not be able to use the payroll tax credits available under the Families First Coronavirus Act for employee retention or the deferral of employer-side social security payroll taxes under the CARES Act.
Good Faith Certification
- To participate in the Paycheck Protection Program, a business is required to certify:
- That the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient;
- Acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;
- That the business does not have a SBA (7)(a) loan pending for the same purpose and duplicative of amounts applied for or received under a covered loan;
- During the period beginning on February 15, 2020 and ending on December 31, 2020, the business has not received amounts under the Paycheck Protection Program for the same purpose or duplicative amounts applied for or received under a covered loan.
