An expansive economic relief package was recently signed into law to address the impact of COVID-19. Under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, several relief and loan programs have been established to provide small businesses with economic support so they can continue operating. A separate piece of legislation, the Families First Coronavirus Response Act (FFCRA), requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19.
With many small-business customers, we at ADI want to help our dealers and installers understand what this means for you.
There are several new or expanded programs under the CARES Act and FFCRA designed for small businesses suffering a temporary loss of revenue or financial difficulty.
Programs are available to those who meet the criteria for small business as defined in the specific programs.
You may apply for multiple loan and relief programs, and applications are now available.
Paycheck Protection Program
Certain small businesses with less than 500 employees, including sole proprietors, independent contractors and self-employed individuals are eligible. Note that there are other criteria or qualifications under existing Small Business Association (SBA) rules which may permit such loans to businesses with more employees which are under certain revenue thresholds.
The maximum loan size is equivalent to 2.5 times the business’s average monthly payroll costs or $10 million, whichever is less, subject to the maintenance of certain employment levels between Feb. 15, 2020, and June 30, 2020, and other conditions.
How loans can be used
The loans are intended to support payroll, certain health benefits, interest on business mortgages, rent and utilities.
Repayment and forgiveness
Some portion of these loan will be subject to forgiveness and deferral of payments, and interest is capped at 4%.
This existing SBA program has been expanded under the CARES Act provide relief to businesses that meet certain SBA eligibility criteria and are experiencing a temporary loss of revenue.
You may apply for an EIDL of up to $2 million. You may also receive an emergency advance on the loan of up to $10,000 that does not have to be repaid.
How loans can be used
EIDLs are loans that may be used to cover working capital expenses that cannot be covered but would have been paid had the disaster or emergency not happened.
Repayment and forgiveness
EIDLs are not eligible for forgiveness but have a low interest rate. The emergency loan advance of up to $10,000 does not have to be repaid.
How to apply
Learn more and apply SBA’s Disaster Loan site. Any loan advance will be issued within three days of a successful application.
The CARES Act has also made changes in other areas to provide relief for small businesses, including:
Tax filing extension
The deadline to file and pay federal taxes has been extended from April 15 to July 15, 2020. Visit IRS.gov for more information. Check with your state for local filing deadlines.
Deferral of certain payroll taxes
You may be eligible for a deferral of the federal employer portion of payroll taxes for 2020.
Application of certain payroll tax credits
You may be eligible for other payroll tax credits as follows:
Under the FFCRA, companies that employ less than 500 employees are required to pay 80 hours of sick leave and up to 12 weeks of family leave for employees who are required to stay home because of certain specific COVID-19-related reasons. Employers who are required provide paid sick leave paying paid leave to employees affected by COVID-19 are given certain tax relief, subject to limitations, to help pay for these benefits.
Employee retention payroll tax credit for employers subject to business suspension or otherwise negatively impacted due to COVID-19. The refundable credit is 50% of payroll taxes on qualified compensation, including health benefits, up to $10,000 per employee.
Check with your advisors to ensure you are receiving the maximum relief to which you are entitled.
Other tax relief
Finally, you may be eligible for other tax relief relating to AMT credits, the removal of modification of certain loss deductibility limitations, and additional ability to deduct interest expenses.
This summary does not include all the relief made available to you but is intended to be a summary of those provisions most likely to be applicable to our customers. Note that this information is not intended to constitute legal or tax advice but is intended as a guide to ensure you are aware of the significant resources that may be available to you. You are advised to consult with your legal and other financial advisors.