This week, the Senate passed an unprecedented $2 trillion stimulus package in an effort to assist the economy during the coronavirus crisis. Part of the package is devoted to helping small businesses affected by COVID-19. Specifically, it aims to help small businesses keep employees on the payroll. Here is some key information to determine if your small business would benefit from the stimulus plan.
Businesses with 500 employees (including independent contractors) or fewer can be eligible for a forgivable loan program so they can avoid laying off employees. A loan can reportedly cover 6 weeks of payroll – up to $1,540 per week, per employee. The loans are capped at $10 million, and can be 2.5 times higher than payroll costs. As long as guidelines are followed and the workforce is maintained, the principal will be forgiven, leaving only 4% interest to be repaid. This “Paycheck Protection Program” essentially turns the loan into a grant if the loan is used for payroll costs, mortgage interest, rent and utility payments and the business maintains the same number of employees. The employees also need to be paid 75% of their previous pay.
Franchise-like businesses (think food businesses and accommodations with multiple locations) can also qualify as long as each location has less than 500 employees.
Another perk of the package is a delay in employer payroll taxes. Small business owners can defer paying payroll taxes in 2020 and can pay 50% of their payroll taxes in 2021, and 50% in 2022.
To apply for the benefits of the stimulus package, employers must provide the previous six weeks of payroll. Then, they will later need to provide proof they continued to pay their employees for eight weeks after receiving the loan.
While the stimulus package has yet to be signed into law, other programs have already gone into effect that can benefit small businesses. For example, the U.S. Small Business Administration is also offering loans with an interest rate of 3.75% that can be used to pay payroll costs, fixed debts, and accounts payable (non-profits would qualify for a 2.75% rate). These loans have long-term repayment options. However, these loans can only be accessed by businesses that have no other available credit to access.
The U.S. Chamber of Commerce has compiled an online guide for small businesses seeking assistance, and the guide includes all the links an employer needs to apply for these programs. That guide can be found here: https://www.uschamber.com/co/small-business-coronavirus.
FGMC continues to proudly support the small businesses in our community and looks forward to the return of their success once this crisis subsides. If you have questions about your small business needs, please contact FGMC today.