“The only constant in life is change."
This has always been true, but it has never felt truer than in the last few weeks.
New policies and regulations have come out at an amazing speed as a response to COVID-19. Although they are good and helpful, you may feel like you are on “information overload” and aren’t sure where to turn for answers. Plus, there are countless new acronyms being tossed around, which adds to the confusion
We want to help small business owners sort through all the information, so we’ve distilled down the components of major legislation and compiled other resources that you may find helpful.
Small Business Administration (SBA) Economic Injury Disaster Loan (EIDL)
As part of this loan program, a $10,000 emergency grant cash advance is available. This amount is forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue loss. As we understand, the emergency cash grant may be available even if you don't qualify for any additional funding. To apply for the grant, check the box next to “I would like to be considered for an advance of up to $10,000” at the end of the application.
Businesses of almost all types with less than 500 employees, as well as sole proprietors and independent contractors, in all states should review the application and consider applying. Loan amounts may vary, but interest rates are favorable (3.75% for small businesses) and the first month's payment is deferred for a full year from the date of the loan origination.
The application is available online here.
Paycheck Protection Program (PPP) Loan through the Coronavirus Aid, Relief and Economic Security Act (CARES) Act
$350 billion has been allocated to help small businesses keep workers amid the pandemic and economic downturn. This program provides 100% federally guaranteed loans. These may be forgiven if employers keep employees or restore them to previously held positions within the required time frame.
Businesses with less than 500 employees are eligible, as well as sole proprietors, independent contractors, and self-employed individuals in a trade or business. Loan amounts are the lesser of 2.5 times the employer’s average monthly payroll costs (calculated over the one-year period prior to the loan application date and capping any employees who make over $100,000/year) or $10 million. Eligible loan forgiveness is based on the 8-week period following the advance of funds from the loan. The amount of loan forgiveness is based on the amount spent on payroll costs, mortgage interest, rent on a lease agreement, and utility payments. Mortgages, Rent/lease agreements, and utilities must have been in place before February 15, 2020. The amount an employer can receive in loan forgiveness may be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. However, if employees are brought back or wages are restored within a given time period, the reduction is eliminated.
PPP loans may be applied for until June 30, 2020, or until funds run out. To apply for this loan, contact your banker at a local SBA-approved lender.
Employee Retention Credit
A provision within the CARES Act, this credit is designed to encourage businesses to keep employees on their payroll. This provides for a payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis up to a maximum of $10,000 of wages, resulting in a maximum credit of $5,000 per employee.
This credit is available for eligible employers whose trade or business has been fully or partially suspended due to government orders or who has experienced a 50% decline in gross receipts for the current quarter, compared to the prior year quarter. Note that this credit cannot be used in conjunction with a PPP loan; if you receive a PPP loan, you are ineligible for this credit.
More information and FAQs are available on the IRS website.
Family First Coronavirus Response Act (FFCRA)
This act created two new emergency paid leave requirements in response to COVID-19, effective April 1, 2020:
- Emergency Paid Sick Leave Act (EPSLA) - entitles qualified employees to take up to two weeks (80 hours) of paid sick leave at their regular rate of pay.
- Emergency Family and Medical Leave Expansion Act (EFMLEA) - entitles qualified employees to take up to twelve weeks of expanded family and medical leave, 10 weeks of which are paid at ⅔ of the employee’s regular rate.
The new leave requirements apply to private sector businesses with fewer than 500 employees and some public sector businesses as well. The 124 page “temporary rule” document provides details on eligibility criteria including, but not limited to, “telework” situations, amount of pay, and requirement to restore employees to their previously held positions (or not). Access the full temporary rule document here.
For businesses that must provide this leave, expenses will be recovered through payroll tax credits. Note that businesses with fewer than 50 employees may be exempt from these provisions if providing the leave could “jeopardize the viability” of the business. If you have an employee that requests leave under EPSLA and EFMLEA, it is important, as always, to document this thoroughly.
FAQs are available on the Department of Labor website.
Note: Private sector and federal employers are REQUIRED to provide notice to all employees of the FFCRA, regardless of whether the employees are eligible for the leave or not. Print a private sector poster at: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf (English)
https://www.dol.gov/sites/dolgov/files/WHD/Pandemic/1422-spanish.pdf (Spanish)
Other resources and helpful information
US Department of Labor: COVID-19 and the American Workplace
US Small Business Administration (SBA): COVID-19 - Small Business Guidance & Loan Resources
US Chamber of Commerce: Coronavirus Small Business Survival Guide
MN Employment and Economic Development Guide for MN Small Businesses Who Need Help
Fergus Falls Area Chamber of Commerce
We understand the uncertainty you may be feeling during this unprecedented time. Nevertheless, we are encouraged by the resources available to keep your business viable and support your employees during this tumultuous time. We know that you are educating yourself on the resources available and invite you to seek help if you don’t understand something. Our thoughts are directed toward all the small businesses going through these challenging times. If you have any questions, please feel free to contact us - we will try to help!