Last updated: April 3, 2020
Millions of small business owners are facing make-or-break decisions, as the world deals with the impact of the COVID-19 pandemic.
“A month ago, we were thinking about expanding, maybe buying a building to accommodate our crazy growth. And now, here we are thinking about how to survive,” STATE the Label founder Adrienne Antonson posted.
But business owners have options.
Intuit QuickBooks and GoFundMe have teamed up to support the Small Business Relief Initiative. Together, they’re seeding the Small Business Relief Fund, and Intuit QuickBooks is helping small businesses make ends meet with additional employee-directed contributions. But that’s not all.
Some QuickBooks customers may be eligible for business funding through QuickBooks Capital. Qualifying businesses may receive funding between $5,000 and $100,000, with terms up to 12 months.
In the meantime, the U.S. Small Business Administration (SBA) and some major corporations are offering loans and assistance to small businesses. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $370 billion stimulus loan package, provides tax credits for small businesses and unemployment benefits for self-employed workers.
SBA disaster assistance program
The SBA’s disaster assistance program isn’t unique to the current pandemic. The SBA offers disaster assistance to small businesses in the wake of natural disasters. SBA loans can help business owners cover expenses for real estate, personal property, economic injury, machinery and equipment, inventory, and other business assets. Disaster assistance loans are available up to $2 million and include low-interest rates and long terms.
When is it available?
SBA disaster assistance loans for businesses in select states affected by the coronavirus became available on January 31, 2020. Other qualifying events include tornadoes, drought, and snowstorms. In addition, Congress passed the Coronavirus Preparedness and Response Supplemental Appropriations Act. The law added $20 million to the SBA disaster assistance program. And in his March 11 address to the nation, President Donald Trump asked Congress to increase funding for SBA assistance by $50 billion. If Congress passes legislation to increase such funding, the president can sign it into law.
Who is eligible?
Businesses, renters, and homeowners located in regions affected by declared disasters can apply for SBA disaster assistance. Those interested can apply through the SBA’s three-step process:
- Check eligible disaster areas.
- Apply online if your business is eligible.
- Check your application status.
The SBA aims to review applications and disburse funds to qualified businesses within three weeks of application submission. To apply, you’ll need to produce the following documents:
- Business loan application (SBA Form 5)
- IRS form 4506-T
- Your most recent federal income tax returns
- A personal financial statement (SBA form 413)
- A schedule of liabilities listing all fixed debts (SBA form 2202)
SBA $10,000 loan advance
To provide immediate assistance, the SBA is offering loan advances up to $10,000 to eligible small businesses that apply for disaster loans. Even businesses that are not approved for larger loans may be eligible for a loan advance. To apply for an advance, complete the SBA disaster assistance application. Resubmitting an application will not impact the status of a pending application. Loan advances may be eligible for forgiveness, depending on the loan terms and conditions.
Small business loans and tax deferment from the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act has set aside $370 billion in aid for small businesses. The aid comes in the form of either a Paycheck Protection Program (PPP) loan, payroll tax credit, or tax deferment. Business owners who apply for PPP loans do not qualify for payroll tax credits or deferment. The CARES Act also expands unemployment benefits to self-employed and gig workers who have lost work due to the coronavirus.
Paycheck Protection Program loans
Paycheck Protection Program (PPP) loans are intended to provide cash flow assistance to businesses and nonprofits unable to pay employees due to COVID-19. If employers use the loan to maintain payroll, then the loan may be forgiven 100%.
Some other benefits of PPP loans include:
- Forgiveness of up to eight weeks of payroll based on employee retention and salary.
- No SBA fees.
- At least six months of loan deferral, with a maximum deferral of one year.
- Loans will be backed by the government 100%.
These loans are to help small business owners avoid layoffs and continue to pay employees. To meet eligibility requirements, employers must employ fewer than 500 workers. And they must sustain 100% of payroll for all employees for up to eight weeks, following the distribution of the loan.
Loan amounts do not exceed $10 million and are based on historic monthly payroll costs between February 15 and June 30, 2019, multiplied by 2.5. For newer businesses without a year’s worth of payroll, loans will be based on employee payroll between January and February 2020. Businesses started after February 15, 2020, do not qualify.
Loans can cover 100% of payroll for employees making less than $100,000 a year. They can also cover sick leave, mortgage payments, rent, utilities, or other debt for two and a half months. Businesses that use the loan for payroll, utility payments, rent, or mortgage interest are eligible for loan forgiveness through their lender. Lenders are responsible for verifying payroll and other forgiveness qualifications.
Payroll tax credits and deferment for small businesses
This provision of the CARES Act provides businesses with a refundable payroll tax credit, known as the Employee Retention Credit (ERC). ERCs are for 50% of wages paid by eligible employers experiencing hardship. Eligible businesses include:
- Employers, including nonprofits, who have halted operations partially or fully due to government orders to reduce travel, cancel large in-person events, or limit commerce.
- Employers who have experienced a quarterly reduction in sales of 50% or greater.
Employers can apply for the credit if they have furloughed workers or reduced employee hours due to either of the above circumstances. For small businesses with fewer than 100 employees, all employee wages (including health benefits) are eligible for the credit, even employees have not been furloughed. The credit is available through the end of 2020.
Additionally, the CARES Act allows businesses of any size to delay paying certain payroll taxes for the remainder of 2020. Taxes include employer-paid Federal Insurance Contributions Act (FIDA) taxes, Railroad Retirement taxes, and half of Self-Employed Contributions Act (SECA) taxes. Businesses can pay back half the deferred taxes at the end of 2021 and the remainder in 2022.
ERCs and payroll tax deferments are not available to businesses that received assistance from PPP loans.
Small business assistance options from other businesses
In addition to government assistance, companies like Amazon and Facebook have pledged to help businesses weather the pandemic and its fallout.
Amazon’s Neighborhood Small Business Relief Fund
Amazon’s Neighborhood Small Business Relief Fund pledges $5 million in assistance. Qualifying businesses have fewer than 50 employees or less than $7 million in annual revenue. And they must rely on foot traffic and be located within a few blocks of Amazon’s Regrade, South Lake Union, and Bellevue offices. To help distribute funds equitably, Amazon is asking applicants to anticipate expected losses associated with the coronavirus.
Facebook’s $100 million pledge
Facebook COO, Cheryl Sandberg, announced Facebook’s pledge of $100 million to small businesses impacted by the coronavirus. Facebook will distribute funds to 30,000 small businesses across the 30 countries where Facebook employees work.
Grubhub Community Relief Fund
Grubhub announced efforts to help small businesses in Chicago, New York City, San Francisco, Boston, and Portland. The Grubhub Community Relief Fund is collecting donations raised through their Donate the Change program. Officials in each of the five cities will help Grubhub identify organizations and small businesses that need help.
Other options to explore
Many companies, federal agencies, and private organizations offer grants for small businesses. Fundera has compiled a list of 107 small business and startup grants offered across the country. Each has its own eligibility criteria, and some include contests. Research each grant to determine if your business qualifies.
- James Beard Foundation Food and Beverage Industry Relief Fund
- Opportunity Fund Small Business Relief Fund
- Restaurant Workers’ Community Foundation COVID-19 Emergency Relief Fund
- MusiCares COVID-19 Relief Fund for entertainers and musicians
- CFDA and Vogue “A Common Thread” Fashion Fund for COVID-19 Relief
Local government and community relief programs
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