This Insights article was contributed by Rachel Gillilan, CPA/CFF (NC License Number 41419), an associate at Adam Shay CPA, PLLC.
This information is current as of 4/21/2020.
1. Economic Injury Disaster Loan (Includes up to $10,000 Emergency Grant)
SBA Economic Injury Disaster Loan (EIDL)
The U.S. Small Business Administration (SBA) is providing low-interest rate federal disaster loans for small businesses and non-profits who have been affected by COVID-19. Currently, small businesses can borrow up to $2M in assistance and the interest rates are 3.75% for small business and 2.75% for non-profits. These loans have long-term repayment options, the maximum being a 30-year term. Funds have currently been all used up, but they are expected to be replenished.
These loans can be used for the following:
- Pay fixed debts
- Accounts payable
- Working capital
- Other bills that can’t be paid because of the impact of COVID-19
Per the SBA’s website, for questions please contact SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail [email protected]
To apply for a COVID-19 Economic Injury Disaster Loan click: https://covid19relief.sba.gov/#/
Emergency Grant (EIDL $10,000 Grant)
The EIDL Grant is calculated as $1,000 per employee up to a $10,000 maximum. It can be combined with the PPP Loans, but the $10,000 grant offsets the PPP forgiveness.
2. Paycheck Protection Program (PPP)
Part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act created the Paycheck Protection Program which provides 100% federally guaranteed forgivable loans to small businesses and 501(c)(3) non-profits with fewer than 500 employees. Loan amounts are up to $10M per business. It’s important to know that these loans can be forgiven if the borrowing business either maintains their payroll or restores it after the crisis. As of 4/21/2020, the original $349 billion allocated to the PPP Loans has been depleted, but there is pending legislation proposing an additional $300 billion to replenish the PPP Loans. We can connect you with banks that are still accepting applications.
How much can I borrow?
SBA loans that are part of the PPP can be up to 2.5 times your average monthly payroll costs, but cannot exceed $10 million.
Payment Protection Program Bill funds may be used for:
3. Employee Retention Tax Credit (ERTC)
- Payroll costs;
- Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
- Employee salaries, commissions, or similar compensations;
- Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation);
- Rent (including rent under a lease agreement);
- Utilities; and
- Interest on any other debt obligations that were incurred before the covered period.
The Employee Retention Tax Credit is available to businesses who have been forced to closed due to a government issued stay-at-home order or have had a 50% reduction in revenues and are unsure if they will rehire all employees. The ERTC may not be combined with PPP or EIDL Grant.
How much is the tax credit?
50% of wages in quarter with a maximum of $10,000 per employee during the period of 3/12/2020 – 12/31/2020. The ERTC stops once the business may reopen or revenues are 80% of the same quarter of the prior year.
4. Delay of Employer Payroll Taxes
Generally, most any business is able to qualify for a delay of Employer Payroll Taxes. The delay of Employer Payroll Taxes is essentially a 0% loan with a 2 year term limit. 50% of the loan will need to be paid back by the end of 2021 and 50% will need to be paid back by the end of 2022. The delay of Employer Payroll Taxes can be combined with the PPP loan, but the tax deferral portion won’t be forgiven. It can also be combined with the EIDL.
How much is the loan?
It is about 6.2% of employee wages from 2/15/2020 – 12/31/2020. For example: An employer paying $100,000 in wages receives a $6,200 0% loan payable over a 2 year period to end no later than 12/31/2022.
Rachel Gillilan, CPA, CFF (NC License Number 41419), is an associate at Adam Shay CPA, PLLC. For more information, visit www.adamshaycpa.com or email her at [email protected]. She can also be reached by phone at (910) 256-3456.