The CARES Act provides almost $350 billion of assistance to small businesses with fewer than 500 employees to manage cash flow and retain employees through these difficult times.
It is critical that you evaluate your eligibility for and the benefits of the available programs since the amount of assistance could vary greatly depending on your specific situation. In order to help you leverage the multitude of benefits available, we’ve collected the attached documents, links, and summary below.
CARES Act Provisions Impacting Small Businesses
Paycheck Protection Program
The flagship small business benefit of the CARES Act is the Paycheck Protection Program, which provides up to eight weeks of forgivable loans for payroll, health insurance premiums, rent, and utility expenses. The loan is generally up to 250% of an employer’s average monthly payroll (up to $10m). The loan forgiveness is not taxable and any unforgiven amounts will have a 1.0% interest rate. Of particular importance is that this program is first-come, first-served with respect to loan applications to access the funds, which begins on April 3 for small businesses and April 10 for independent contractors & self-employed workers. For more information, review the Treasury guidance on the Paycheck Protection Program.
SBA Debt Relief
SBA will make six months of payments (including principal, interest, and fees) toward existing and outstanding SBA loans. Eligible loans include 7(a), Community Advantage, 504, and Microloan.
SBA Economic Injury Disaster Loans (EIDL) Advance
Small business owners are eligible to apply for an emergency advance of up to $10,000. This loan does not need to be repaid and can be approved in as little as three days. In addition to payroll, it can be used to pay fixed debts, accounts payable and other bills that can’t be paid due to the impact of the coronavirus. Additionally, loans of to $2 million are available where the first payment is deferred for 12 months.
Payroll Tax Deferral
The CARES Act effectively creates a tax-free loan by deferring payment of 50% of an employer’s 2020 payroll taxes until December 31, 2021 and the other 50% until December 31, 202. (Note: The employee’s share of the payroll tax is not eligible for deferral.) Individuals with self-employed income are also eligible for this benefit on half of the self-employment tax due. If you have a Paycheck Protection Program loan forgiven, you are not eligible for this benefit.
Employee Retention Credit
A new tax credit is available to employers who experience at least a 50% decrease in 2020 revenue from the same quarter in 2019. The credit is equal to 50% of qualified wages (up to $10,000 in wages) for each employee. Businesses participating in the Paycheck Protection Program are not eligible for this benefit.
Advance Payment of Payroll Tax Credits
The CARES Act allows eligible employers to request advance payment of tax credits used for the new paid sick leave and enhanced family medical leave benefit required of employers with fewer than 500 employees.
While many of these benefits are administered through your bank, the Small Business Association (including local SBA assistance), your payroll provider and/or accountant, let your financial advisor know if they can be of assistance. We are all in this together.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
CFP®, CPA, Series 7 Securities Registration,1Series 66 Advisory Registration,† Insurance License Brian diligently advises clients on income, gift, trust and estate tax issues while leveraging the expertise of the Roundtable to deliver comprehensive, customized strategies. For more than 10 years he has helped numerous clients develop and implement sophisticated financial, tax and estate strategies that are in alignment with their goals and values. Brian is a...Read More