Federal Assistance for Small Businesses
Sen. Schatz News Release
U.S. Senator Brian Schatz released a resource guide to help Hawaii small businesses like many on Molokai better understand how to access federal loans and new programs established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The bipartisan $2 trillion CARES Act is the largest aid package in American history and was signed into law last Friday.
“This new law will help Hawaii small businesses meet their payroll and provide people with paychecks for up to eight weeks,” said Senator Schatz, a member of the Senate Appropriations Committee. “As more federal help becomes available, we’ll continue to work to provide more information about how Hawaii families and businesses can access these new resources.”
The CARES Act provides relief for small businesses that have trouble covering payroll and operating expenses because of the COVID-19 pandemic. The new law creates a Small Business Administration (SBA) loan program, called the “Paycheck Protection Program” (PPP), that expands benefits and eligibility for SBA disaster loans, covers payments on existing SBA loans, and creates new tax credits to help cover the cost of paid leave and payroll.
The full small business resource guide can be found below and is available online at schatz.senate.gov/coronavirus/small-businesses.
SBA Paycheck Protection Program
The Paycheck Protection Program provides small businesses with zero-fee loans of up to $10 million to cover payroll and other operating expenses. Up to eight weeks of payroll, mortgage interest, rent, and utility costs can be forgiven. Payments on principal and interest are deferred for one year.
SBA Economic Injury Disaster Loans
The CARES Act creates a new emergency grant of $10,000 for small businesses that apply for an SBA economic injury disaster loan (EIDL). EIDLs are loans up to $2 million with interest rates of 3.75 percent for businesses and 2.75 percent for nonprofits, and principal and interest payments deferred up to four years. The EIDL loans may be used to pay for expenses that could have been met had the disaster not happened, including payroll and other operating expenses. The EIDL grant does not need to be repaid even if the applicant is denied an EIDL. A small business may apply for an EIDL grant and a Paycheck Protection loan. The EIDL grant will be subtracted from the amount of the Paycheck Protection loan that is forgivable.
Debt Relief for New and Existing SBA Borrowers
For small businesses that already have an SBA loan (such as a 7(a), 504, or microloan) or take one out within 6 months after the CARES Act is enacted, the SBA will pay all loan costs for borrowers, including principal, interest, and fees, for six-months. SBA borrowers may also seek an extension of the duration of their loan and delay certain reporting requirements.
Relief for Small Business Government Contractors
If you are a government contractor, there are a number of ways that Congress has provided relief and protection for your business. Agencies will be able to modify terms and conditions of a contract and to reimburse contractors at a billing rate of up to 40 hours per week of any paid leave, including sick leave. The contractors eligible are those whose employees or subcontractors cannot perform work on site and cannot telework due to federal facilities closing because of COVID-19. If you need additional assistance, please reach out to your local Small Business Development Center, Women’s Business Center, SCORE chapter, or SBA District Office. You should also work with your agency’s contracting officer, as well as the agency’s Office of Small and Disadvantaged Business Utilization (OSDBU).
Employee Retention Tax Credit
The CARES Act creates a refundable payroll tax credit for businesses, large and small, that retain their employees during the COVID-19 crisis. Employers are eligible if they have been fully or partially suspended as a result of a government order, or they experience a 50 percent reduction in quarterly receipts as a result of the crisis. For employers with 100 or fewer full-time employees, they may claim a credit for wages paid to all of their employees, up to $10,000 a person. For employers with more than 100 employees, they may claim a credit for those employees who are furloughed or face reduced hours as a result of the employer’s closure or economic hardship. The Department of the Treasury is authorized to advance payment of the employee retention tax credit. This tax credit is not available if the employer takes an SBA paycheck protection loan.
Payroll Tax Delay
The CARES Act allows employers to delay paying the employer-portion of payroll taxes through the end of 2020. The deferred amount is due in two installments – 50 percent is due before December 31, 2021, and the other 50 percent is due before December 31, 2022. Deferral is not available if the employer takes an SBA paycheck protection loan.
Advance Payment of Tax Credits for Paid Leave
The CARES Act allows the Treasury to send advance payments of tax credits available to employers that are required to provide up to 12 weeks of coronavirus-related paid leave to their employees.
Business Tax Relief
The CARES Act provides other forms of tax relief for businesses, including loosening requirements for net operating losses, and limitations on business interest deductions. The CARES Act also permanently fixes the qualified improvement property (QIP) error in the 2017 tax law, so that QIP investments are entitled to 100 percent recovery over 15 years.
For more information about SBA loan programs, please visit the Small Business Administration website. More information about small business programs in the CARES Act and other resources for small businesses can be found on the U.S. Senate Committee on Small Business and Entrepreneurship website.