COVID-19 Information for Small Business Owners

COVID-19 SBA & Government Info & Resources for Small Business:

Updated 5/15/2020

On this page we have attempted to gather the latest information about the different programs and resources available to small business owners as we deal with the COVID-19 (Coronavirus) crisis.

IMPORTANT: As our government agencies release new and sometimes conflicting guidance, it’s important to understand that each business owner must assume the responsibility of interpreting the guidance applicable to their marketplace, state, and individual business circumstances and respond accordingly. The information we are sharing here and on our podcast is just our current understanding of these different assistance programs and we are not experts on this subject. You must consult with your CPA, attorney and other professionals for additional guidance before making any decisions based on the information we are sharing with you.

We have tried to organize the information by major topic or program. If you have any questions, comments, or additional information to share, please leave a comment on this page. Thanks!

Page Index:

Best Sources of COVID-19 Information:

What’s New:

  • 5/15/20: All of the federal funds for both the EIDL and PPP loan programs have been fully allocated – there is no money left from these programs. If you did not previously apply, you will not be able to apply at this time. The only exception is the SBA EIDL program which appears to be accepting applications for U.S. Agricultural businesses only.
  • 5/15/20: If you received funding on a PPP loan, it’s important to clearly understand the terms related to potentially having the loan forgiven. In summary, you must spend 75% of the loan on payroll over the 8 weeks following funding, and you must return your payroll and number of employees to the same levels as before February 15th. Read more details in the PPL section of this page.
  • 5/15/20: Be aware of scams! These scams include asking you for a fee to process or expedite your EIDL or PPP loans. There are NO FEES associated with either of these programs. There may be other lenders claiming to be offering some type of disaster relief loans – while these may be legitimate loans, they are likely NOT associated with any of the federal relief programs. Be careful to clearly understand the terms of any loans before signing any document.

Top Action Items:

  • If you are open for business, and you have employees, be sure that you are adhering to the Families First Coronavirus Response Act (the initial act signed into law in response to the coronavirus crisis) as it relates to paid sick leave for your employees. (See more details below.)
  • If you received a Paycheck Protection Loan (PPL), you should become familiar with the terms of your loan, including the possible Loan Forgiveness terms. Each bank may have slightly different rules on qualifying for PPP loan forgiveness, and all banks are waiting on further clarification from the SBA.
  • If you have employees, and are still open for business, you must post the Employee Rights Poster.
  • Do you have a plan for how you will re-open you business?

Overview: The CARES Act (Coronavirus Aid, Relief and Economic Security Act): 

You can read the entire CARES Act here.
Find the latest information about the coronavirus here.

As a result of the recently enacted CARES Act, the Small Business Administration (SBA) is now offering various funding options for small businesses impacted by the COVID-19 pandemic. The image below, from the SBA website, summarizes the primary programs and options currently available to small business owners.

SBA COVID-19 Funding Options for Small Business

[Image Source: SBA.gov]

Highlights of the CARES Act for Small Business:

  • Enacted on March 27, 2020.
  • Included the SBA EIDL and PPP loan programs
  • A 50% refundable payroll tax credit on worker wages will further incentivize businesses, including ones with fewer than 500 employees, to retain workers.
  • Looser net operating loss-reduction rules that will allow businesses to offset more loses.
  • A delay in employer-side payroll taxes for Social Security until 2021 and 2022.
  • Sole proprietors and other self-employed workers could be eligible for the expanded unemployment-insurance benefits the bill provides.

COVID-19 Podcast Episodes:

SBA Economic Injury Disaster Loan Program (EIDL) & Loan Advance (Grant):

Find more information from the SBA about this program here.

Download the U.S. Chamber of Commerce EIDL Guide here.

Update: 5/15/20 – from the SBA:

“SBA has resumed processing EIDL applications that were submitted before the portal stopped accepting new applications on April 15 and will be processing these applications on a first-come, first-served basis. SBA will begin accepting new Economic Injury Disaster Loan (EIDL) and EIDL Advance applications on a limited basis only to provide relief to U.S. agricultural businesses.

The SBA will work directly with state Governors to provide targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the COVID-19. The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The CARES Act also includes a possible Loan Advance (Grant) of up to $10,000 which will be completely forgiven (you don’t have to pay it back!). There are no fees and no prepayment penalties.

How to Apply:

  • Apply for this EIDL Loan AND the Loan Advance here. You can apply once the SBA resumes accepting applications.
  • The application is completed on the SBA website and should only take about 15 minutes to complete.
  • Be sure to check the box for the Loan Advance and include your business bank account information (see the image below).
    SBA Loan Advance
  • The SBA is saying that small businesses will receive the up to $10,000 grant. This is the grant portion and it will be sent electronically from the U.S. Treasury department. The SBA has explained what small businesses may be granted $1,000 for each employee up to $10,000.
  • About processing your application, you will be contacted by the SBA about your loan application for additional lending under this program. You are under no obligation to accept the loan, and there are no fees.
  • For the question on the application for Cost of Goods Sold, you should enter the amount that normally appears in the Cost of Goods Sold line on the business federal tax return. For many businesses, like services or consulting businesses, Cost of Goods Sold is typically zero. Cost of Goods Sold is the cost of your raw materials when you make a product, including your food costs if you are a restaurant.

Additional Information:

  • This enhanced EIDL program includes the Loan Advance, providing up to a $10,000 up-front which will be forgiven. This advance is also being referred to as a Grant, since you do not have to pay it back.
  • It’s one application for both the Loan Advance and the potential EIDL loan.
  • The up to $10,000 Loan Advance (Grant) in an emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue loss.
  • Some of the qualifiers for small businesses for the EIDL loan include:
    • Applicant is a business with not more than 500 employees.
    • Or, applicant is an individual who operates under a sole proprietorship, with or without employees, or as an independent contractor.
    • Must have started your business by January 31, 2020 to qualify, so you can’t start a business now and qualify for this loan or the grant.
  • All 50 states have been declared disaster areas and are considered eligible areas for this loan.
  • The lending decision is based on self-certification and the applicant’s credit score.
  • These EIDL loans for small business can be approved by the SBA based solely on an the applicant’s credit score (not repayment ability and no tax return is required). A prior bankruptcy doesn’t disqualify you.
  • Loans smaller than $200,000 can be approved without a personal guarantee. They are also not requiring real estate as collateral and will take a general security interest in business property. The maximum unsecured loan amount is $25,000 (not clear how accurate this is).
  • These EIDL loans are considered working capital loans, and may be used 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 for expansion.
  • The term is 30 years. Interest Rates are 3.75% for small business. There are no loan fees, guarantee fees or prepayment fees.
  • Payments on coronavirus EIDL loans are deferred for one year.
  • Loans will be administered by banks and other lenders. Once the online application you submit to the SBA is reviewed and approved, your will then be working with an SBA-approved bank.
  • You can apply for both this EIDL and the Payroll Protection Loan, as long as they cover different expenses (not a duplicative purpose). This is also true if you’re pursuing other local or regional government assistance.
  • For these EDILs the SBA does not work with “loan packagers.” So, there’s no need to pay someone to put an application together for you. You should only apply directly through the website. Please be careful with scams asking you to pay a fee for loan processing or expediting.

Paycheck Protection Program (PPP) – “Payroll Protection Loans (PPLs)”:

Learn more about the SBA Paycheck Protection Program here.

Download the U.S. Chamber of Commerce PPL Guide here.

Program Update – 5/15/20: The additional funds appropriated by the federal government for this program have all been allocated now. Contact your bank to check on the status of your previously submitted application.

As part of the CARES Act, the Paycheck Protection Program for small businesses is intended to help you maintain your employees on payroll.  You apply for the loan through an SBA-approved bank, using the new loan application provided by the SBA. This loan may be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). There are no fees and no prepayment penalties.

Loan Forgiveness:

If you have received a PPP loan for your business, it’s important that you clearly understand the potential forgiveness rules for your loan. Not having to pay back this loan may be critical to the financial health of your small business. The SBA has not yet provided complete guidelines on PPP loan forgiveness, so you currently have to carefully read and understand your lender’s current interpretation. Here are some of the primary terms for PPP loan forgiveness we are aware of:

  • Payments on your PPP loan will be deferred for the first six months (assume that this starts when your loan was funded – when you received the money) so there is no payment due for six months. You will probably not receive statements while your loan is in the deferment period. The loan will accrue interest at a rate of 1% during the deferment period.
  • The loan may be fully forgiven if the funds are used for payroll costs (at least 75%), interest on mortgages, rent, and utilities.
  • Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
  • You’ll be able to apply for loan forgiveness through your PPP lender after the initial eight-week period, beginning when your loan was funded. When you apply, you’ll need to provide documentation for your eligible expenses. Only the amount of eligible expenses during the eight-week period after you received the funds may be forgiven.
  • If you receive any EIDL Grant money (up to $10,000) through the SBA EIDL Advance program, then that amount may be deducted from the amount that can be forgiven. (As of 5/15/20, not completely clear on this rule.)
  • After the six-month deferment period, any balance (including any accrued interest) that is not forgiven will become an 18-month term loan with an interest rate of 1%, and you’ll need to start making monthly payments.
  • We recommend consulting with a CPA, tax advisor, financial advisor or attorney with any specific questions and to help you determine your specific situation and requirement for these assistance programs.

How to Apply:

  • Contact an SBA-approved bank. We recommend starting with the bank where you have your business account now. There are also online SBA-approved banks. You can also apply with multiple lenders.

Additional Information:

  • If your small business is closed and you terminated your workforce, and are not planning to rehire all of them by June 30th, then you may not want to apply for this loan. Nonetheless, you may want to consult with your banker before determining not to apply.
  • This program is for any small business with less than 500 employees (including sole proprietorship, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
  • To qualify you must have started your small business before February 15th, 2020.
  • Self-employed, sole proprietors, freelance and gig economy workers are also eligible to apply.
  • Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
  • Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
  • 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. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
  • This loan may be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll).
  • If you receive any Grant money through the EIDL Advance, then that amount may be deducted from the amount that can be forgiven.
  • Loan payments will be deferred for six months.
  • No collateral or personal guarantees are required.
  • Neither the government nor lenders will charge small businesses any fees.
  • Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
  • In order for the loan to be forgiven, you must maintain the same average number of employees for the first eight-week period beginning on the origination date of the loan as you did from February 15, 2019 – June 30, 2019 or from January 1, 2020 until February 15, 2020. If you don’t meet this requirement, the amount forgiven is reduced. You incur additional reductions if you cut compensation for employees who make under $100,000 by more than 25%, as compared to the most recent quarter. The US Chamber of Commerce offers a step-by-step calculation, starting on page 8, here.
  • You won’t be penalized for a reduction in employment or wages during the period from February 15, 2020 to April 26, 2020, if you rehire employees that you previously laid off or restore any decreases in wages or salaries by June 30, 2020.
  • If any part of the borrowed money is used for unauthorized purposes, that amount will not be forgiven.
  • Loan forgiveness will be administered by the lender.
  • If not forgiven, this loan becomes an SBA 7(a) Loan with special provisions.
  • This loan has a maturity of 2 years and an interest rate of 1.0%.
  • There’s an automatic six-month deferral on payments for all borrowers. You would need to start paying it back, with interest, after six months.
  • No personal guarantee or collateral is required for the loan
  • You can apply for both the EIDL and the Payroll Protection Loans, as long as they cover different expenses (not a duplicative purpose). This is also true if you’re pursuing other local or regional government assistance.
  • What Lenders will be looking for from you:
    • The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
    • The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
    • Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
    • From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan)
    • If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents
      (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.
  • From the Treasury Department:
    “You are also eligible for a PPP loan if you are an individual who operates under a sole proprietorship or as an independent contractor or eligible self-employed individual, you were in operation on February 15, 2020. You must also submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.”

SBA Debt Relief – for existing SBA loans:

The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis.
Under this program:

  • The SBA will PAY the principal and interest on 7(a) loans for six months.
  • Borrowers who are still paying back SBA loans from a previous disaster can defer payments through December 31, 2020. This will be automatic. Borrowers of home and business disaster loans do not have to contact SBA to request deferment.

SBA Express Bridge Loans – for current SBA borrowers:

The Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan (EIDL). If a small business has an urgent need for cash while waiting for decision and disbursement on Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.

Express Bridge Loan Terms:

  • Up to $25,000
  • Fast turnaround
  • Will be repaid in full or in part by proceeds from the EIDL loan

Employee Retention Tax Credit (ERTC):

Download the U.S. Chamber of Commerce ERTX Guide here.

This is an Employee Retention Tax Credit (ERTC) for impacted employers that keep their employees, despite being impacted by COVID-19. This tax credit covers up to 50% of the first $10,000 of compensation, including health benefits, paid to an eligible employee. You would receive this tax credit on your 2020 federal tax return for your small business.

Federal Tax Return Deadline & Payroll Taxes Deferred:

The April 15, 2020 tax-return filing deadline has been deferred three months. All federal income-tax payments that would otherwise be due on April 15 can now be deferred until July 15 with no interest or penalties, and without taxpayers having to submit extension requests to the Internal Revenue Service. This development applies to individual taxpayers and probably to trusts, estates and corporations that use the calendar year for tax purposes too.

We don’t yet know if filing deadlines for federal payroll-tax returns and federal estate- and gift-tax returns will also be delayed. We also don’t yet know if the normal April 15 deadline for making IRA and health savings account (HSA) contributions for your 2019 tax year will be delayed.

Delay of Payment of Employer Payroll Taxes:

  • Defers the deposit of employer payroll taxes and 50% of self‐employment taxes owed with respect to the
    remainder of the 2020 tax year over a two‐year period.
  • Half of the amount will be due by 12/31/2021 and the rest by 12/31/2022.

Families First Coronavirus Response Act (FFCRA) (Initial Act):

Download the U.S. Chamber of Commerce Coronovirus Paid Leave Programs Employer Guide here.

Here is the employee information poster you should post at your workplace immediately: Employee Rights Poster

The Families First Coronavirus Response Act is the initial coronavirus relief bill. This new law requires small employers — those with fewer than 500 employees — to provide limited paid-leave benefits to employees who are affected by the coronavirus emergency. Small employers are given new tax credits and federal payroll-tax relief to pay for the new mandatory benefits.

Mandatory employee paid leave (Paid Sick Leave – 2 weeks)
The Act requires emergency paid sick leave. It is limited to $511 per day for up to 10 days (80 hours for full-time, less for part-time) (up to $5,110 in total) for an eligible employee in coronavirus quarantine or seeking a coronavirus diagnosis. An employee can also receive emergency paid sick leave of up to $200 per day for up to 10 days (up to $2,000 in total) to care for a quarantined family member or a child whose school or child-care location has been closed due to the pandemic.

  • Starts April 1st, 2020.
  • This is in addition to any PTO employee may have accrued.
  • All employees qualify, regardless of how long they have been employed.

Emergency Family and Medical Leave Expansion Act (eFMLA) (10 weeks)
The Act also requires that small-business employees be given the right to take up to 12 weeks of job-protected family leave if the employee or a family member is in coronavirus quarantine or if the school or child-care location of the employee’s child is closed due to the coronavirus. The employer must pay at least two-thirds of the employee’s usual pay, up to a maximum of $200 per day, subject to an overall per-employee maximum of $10,000 in total family-leave payments.

  • We are not clear how this is interpreted for those impacted by shelter-in-place orders.
  • There may be an exception for small businesses with less than 50 employees, but this is not yet clear.
  • Employers must post a notice regarding paid sick leave in the workplace.
  • Employers of health care providers or emergency responders are exempt from this type of leave.
  • Must be employed for 30 days to be eligible.

Termination of Employees – Points to Consider:

During the COVID-19 crisis, small business employers have various options regarding their employees:

  • Continue paying employees
  • Furlough employees
  • Terminate employees

Continue paying employees: If you continue to operate your small business, then of course you must continue to pay your employees for their work. You do have the option to reduce hours and wages to lower your costs. Also, even if you decide to or must close your small business, you can optionally decide to continue paying your employees.

Furlough: Furloughed employees remain employees but temporarily perform no work for your small business. These furloughed employees receive no pay while they are not working. The may, however, remain eligible for benefits such as health insurance coverage and paid leave under the Families First Coronovirus Response Act (FFCRA). At the end of the furlough, the employee returns to work for your small business.

Terminate: When you terminate, employees are fully separated from your small business and are no longer eligible for any benefits. Former employees are not eligible for FFCRA paid leave. It’s important to understand and consider, however, that terminating employees always carries inherent risk. Any termination should be based on economic uncertainty, such as declining revenue, and not the COVID-19 outbreak. Offering severance pay in return for a release of claims may help to reduce this risk (you must consult with you attorney on this point).

Before deciding to terminate your small business employees, you should consider these points and we also advise that you consult with an attorney:

  • You should issue a written termination to the affected employees individually.
  • Any termination should be based on economic uncertainty, such as declining revenue, and not the COVID-19 outbreak.
  • Your reasons for terminating the employee should be because of “uncertainty about the future of the business…” or “due to the economic uncertainty…”, or “there is no work currently available or in the foreseeable future due to economic conditions …” depending on the actual impact on your small business.
  • Your reason for terminating an employee should NOT be solely because of COVID or any illness an employee may or may not have.
  • Offering severance pay in return for a release of claims may help to reduce this risk (you must consult with you attorney on this point).
  • Upon termination, you must pay all accrued benefits including any PTO, Vacation, or Sick Pay.
  • And remember that an employees health details, including if they may have or have been diagnosed with the coronavirus, is confidential and CAN’T be shared or disclosed with others.

State Unemployment Benefits – Pandemic Unemployment Assistance Program (PUA):

Top Issues:

  • States do not appear ready to accept applications for non-W2 workers.
  • Most state sites are overwhelmed and may not be operating properly – recommend trying to submit your application during off hours.

Unemployment Benefits typically range from about $200 to $550 a week, on average, depending on the state, and typically replace about 40% of one’s wages. Jobless workers will soon get an extra $600 a week on top of their state benefits, for up to four months, as part of the CARES Act.

The CARES Act also added up to 13 weeks of extended benefits, on top of state programs, which vary between up to 12 and 28 weeks.

The new Pandemic Unemployment Assistance Program expands eligibility to those who are unemployed, partially unemployed or unable to work because of the virus and don’t qualify for traditional benefits. This also includes independent contractors, the self-employed and gig economy workers.  Congress also allowed states to relax some of the rules to make it easier to approve applications. The extended benefits and pandemic program end by December 31.

The Pandemic Unemployment Assistance (PUA) program benefits will:

  • Provide unemployment to workers who don’t traditionally qualify. The amount will be based on previous income, and will vary based on location and benefit guidelines.
  • Include supplemental benefits. Eligible workers will receive $600 a week in additional benefits for up to four months.
  • Provide extra weeks of benefits. There will be an additional 13 weeks of benefits to help those who are still unemployed after they run out of state benefits. The length of state benefits varies based on location, but the maximum is 26 weeks.

As an example of how states are dealing with the overwhelming number of filings, Texas’ online system is so overloaded that the state Workforce Commission recommends people file in the middle of the night or very early in the morning. The agency’s website notes that usage is lower between 10 p.m. and 8 a.m. New York is asking people to file on certain days, based on the first letter of their last name.

Business Insurance:

It’s possible that your commercial insurance policy for your small business may provide some level of business interruption benefits. You should contact your Insurance Agent or Broker to get more information about what your policy may cover in this situation.

You may also want to consider filing a claim for Business Interruption coverage, even if there is a likelihood that it will be denied. This way, if the government intervenes and requires insurance companies to cover these claims or provides some other type of related relief, you have already filed and may be eligible for further consideration.

Retirement Accounts (IRA and 401k):

The new CARES Act temporarily loosens the rules on hardship distributions from retirement accounts, allowing individuals affected by the coronavirus crisis to access up to $100,000 of their retirement savings without the usual 10% penalty.

The CARES Act also doubles the amount 401(k) participants can take in loans from their retirement account for the next six months to the lower of $100,000 or 100% of the account balance, except for IRAs which don’t permit loans.

It’s important to consider that just because you can get this money from your retirement accounts doesn’t mean you necessarily should, since doing so could have long-term negative consequences for your retirement planning.

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