During difficult times, we are here to help our clients navigate uncharted waters with relevant and timely information, even if it’s not directly insurance related. To that end, we want to make sure you know about provisions passed by Congress the second half of March to assist business owners facing cash flow challenges from the coronavirus outbreak. For small businesses (those with 500 or fewer employees) that are coping with business challenges from the coronavirus, these include loans and refundable tax credits to provide substantial cash flow assistance.
Small Business Administration Loans
As part of the Coronavirus Aid, Relief and Economic Security Act (CARES), the Small Business Administration (SBA) program allows the SBA to provide federally backed loans through June 30, 2020, to cover operational costs including payroll, rent and health benefits. These low-rate loans do not require personal guarantees or collateral and have a maximum loan amount of two and a half times the average monthly payroll costs, up to $10 million.
The SBA requires employers to make a “good faith certification” that the money will go toward retaining workers, maintaining payroll or paying necessary expenses, like rent. Importantly, if an employer continues to pay workers through June, the amount of the loans that went towards eligible costs will be forgiven. Eligible costs for forgiveness include payroll costs for employees earning up to $100,000 annually, rent or mortgage payments, and utilities. The amount forgiven will be scaled back if an employer lays off workers or reduces their pay. Additional information on the CARES act and this loan program can be found here.
Time is of the essence for many small businesses, and the SBA has stepped up efforts to expedite this loan program. The SBA is posting information for small business owners here.
Reimbursement for Paid Leave
On March 18, 2020, Congress created emergency paid leave programs under the Family First Coronavirus Response Act (FFCRA), to respond to the outbreak. Read about those requirements here.
To offset the cost of these programs, the law provides employers with refundable payroll tax credits to cover the cost of providing paid sick leave and paid family medical leave. Employers can receive a 100% tax credit against their payroll tax liability up to the capped amount of benefits they must pay. This is important because without this mechanism, the employer would be reimbursed at some later date—perhaps weeks, months or even a year later—after the coronavirus damage had already been done. Under the new law, employers can recoup these leave payments immediately via payroll tax credits. Read more about these tax credits here.
Finally, we invite you to visit the Hylant Coronavirus Resource Center at https://hylantcoronavirusinfo.com/ to access a wide variety of materials designed to help you navigate these unprecedented times. This site will be updated frequently.