While the economy remains sluggish at best amid the coronavirus pandemic afflicting the nation, Capitol Hill is throwing small businesses a lifeline — billions of dollars in grants, loans, tax credits and other means to staunch the bleeding.
Congressman Pete Stauber, R-Duluth, shared this and more observations of the Coronavirus Aid, Relief and Economic Security Act during a conference call with over 80 small business owners, development organizations and the Brainerd Lakes Chamber of Commerce on Wednesday, April 8. While imperfect, the CARES ACT represents a positive bipartisan step forward, he added, and it lays the groundwork for further legislation to patch the holes in an economy reeling from the coronavirus pandemic.
Clocking in at $2.2 trillion, Stauber said the CARES Act — which allocates billions in funding for individual workers, health care manufacturers and providers, large corporations and small businesses, among other measures — represents one of the most pro-small business pieces of legislation in recent years. This is a boon for a struggling economy, he said, especially when small businesses make up a significant block of it.
“This is extremely, extremely tough on small businesses. The next three, four months is where they make their money for the year,” Stauber said. “I think that we need to have a good discussion, and have a good discussion with not only the Minnesota chamber, but our respective individual chambers on how we can look at some of those businesses so we can open them up.”
Joining Stauber was John Kirchner, executive director of congressional and public affairs at the U.S. Chamber of Commerce in the states of Iowa, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin. Kirchner’s assessment of the CARES Act boiled down to an enormous allocation of resources that were necessary during an unprecedented crisis.
“I don’t think small businesses would have much of a chance if it wasn’t for this federal CARES Act,” Kirchner said.
In turn, Stauber and Kirchner were joined by Brian McDonald, acting district director of the Small Business Association for Minnesota, who advised businesses to seek all resources made available to them, but also to exercise caution in this search.
“I just wanted to remind everyone to be aware of scams and fraud teams,” McDonald said. “We're seeing a lot of these pop up. I just wanted to emphasize that there is no cost to apply for the … Economic Injury Disaster Loan Program, or the Paycheck Protection Program. At the SBA we do not require upfront payments of any kind.”
During the conference call, Kirchner and McDonald walked local businesses through some of the options they have to weather the COVID-19 outbreak.
Kirchner noted all employers have the option to delay payroll taxes including Social Security from now until Jan. 2, 2021. If they opt to delay payroll taxes, 50% will be due by the end of 2021 and the remaining 50% will be due by the end of 2022. This does not apply to employers who have their loans forgiven under the Paycheck Protection Program.
Employers who have experienced a partial or total shutdown of services during the crisis should be eligible for an employee retention credit. It is a refundable tax credit for 50% of wages, including the employers’ health planning. This is paid by the employer up to $10,000 per employee, or, in other terms, the employee retention credit covers up to $5,000 per employee. Kirchner said this only applies to employers with more than 100 employees who have a total shutdown, with staffers at home and unable to work remotely. This credit is eligible for all employee pay at companies with 100 employees or less. This does not apply to employers who have their loans forgiven under the Paycheck Protection Program.
The Paycheck Protection Program is a large all-encompassing $349 billion program with loans for small businesses, including sole proprietors, independent contractors and nonprofits with less than 500 employees. The loans are equal to the lesser of the two — either, the average payroll of two and a half months, or a lump sum of $10 million. Kirchner said these loans will convert to interest-free grants, equal to the amount of that loan the employer spent on payroll, rent, mortgage interest and utilities for eight weeks after the implementation of the loan. Of that, 75% of those expenses have to be in payroll for that to take effect.
In terms of these loans, loan forgiveness is reduced proportionally with each reduction of full-time employees, and similarly loan forgiveness is reduced if wages are reduced by more than 25%. For employers who have already laid off workers or reduced wages during the crisis, the loan forgiveness reductions will be waived if employees return or wages are restored within 30 days through June 1. With the implementation of the CARES Act, employees who have already reduced their workforce or wages have until April 26 and must maintain this arrangement through June 1 at minimum.
Kirchner said all employers of 500 or fewer workers are eligible for Economic Injury Disaster Loans, or up to $2 million of working capital for a loan of 30 years. Payments are deferred for one year. No tax returns are required. Loans are based on credit scores. Up to $200,000 may be acquired without a personal guarantee.
If employers apply for an Economic Injury Disaster Loan and are denied, they can utilize an emergency grant up to $10,000. These grants do not need to be repaid. This may come into conflict with the Paycheck Protection Program, so small businesses are advised to consult with lenders to determine which is the better option for their particular situation.
McDonald said the SBA is also offering Express Business Loans up to $25,000 and advised small businesses to seek resources on the SBA website, small business development centers, as well as local chambers and economic development organizations.