Second Round of Coronavirus relief
The second round of Coronavirus relief funding was approved last Friday, so apply as soon as possible through your preferred financial institution. As you might know, the first round of funding lasted less than two weeks and some of the banks had a relatively small allocation running out of funds in a matter of hours. Note that additional guidance is provided constantly on these programs by SBA.
Paycheck Protection Program (PPP)
The PPP is a 1% interest loan to be payable in two years. PPP applicants are required to make a number of certifications relating the eligibility, such as support the ongoing operations or availability of alternative liquidity, and use of funding.
The interesting aspect of this PPP loan is its forgiveness if you meet the requirements, such as:
- Spend the funds in 8 weeks after the disbursement in your bank account
- Spend at least 75% of the funds in payroll cost – we recommend to cover at least 80 or 85% so we ensure the forgiveness
- Keep the same number or more of Full Time Employees (FTE) to the base period
- Do not reduce the employee salary more than 75% from previous quarter
Extremely important that since the disbursement of the PPP loan to the borrower, you have eight weeks to use the funds. This is less than two months.
Economic Injury Disaster Loan (EIDL)
The Economic Injury Disaster Loan is a loan up to $2 million to be payable in up to 30 years, with interest rates of 3.75% for profit and 2.75% for non-for-profit. The EIDL included an advance of up to $10k (grant). As of the time of this post, the SBA website displayed the following message: SBA is unable to accept new applications at this time for the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program (including EIDL Advances) based on available appropriations funding.
You can apply for the PPP and EIDL simultaneously, but you cannot use the funds for the same purpose.
Employee Retention Credit
If you are not approved for the PPP or not applying for it, the Employee Retention Credit (IRS tax credit) might be a great option for your business if you continue to have payroll costs.
Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either:
- Full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- Significant decline in gross receipts versus the previous quarter (i.e. 50% decline of sales / gross receipts)
For each employee, wages (including certain health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit. In order to claim the new Employee Retention Credit, reach out to your payroll provider.
Stay healthy and reach out to us if you want more information. We have been participating in the media, Chambers of Commerce, online meetings, etc. to educate business owners on these programs.
SBA Coronavirus relief – https://www.sba.gov/funding-